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Wednesday, March 07, 2007

ID theft forecast: Gloomy today, worse tomorrow

Virtually every trend line for identity theft is bad news, a research analyst said today as she released a survey showing that 15 million Americans were victimized during a recent 12-month span.  For the year-long period that ended last August, 15 million people were burned by some kind of fraud related to identity theft, said Avivah Litan, a Gartner Inc. analyst.  The average identity theft fraud loss more than doubled in 2006 to $3,257 from $1,408 the year before, while the percentage of recovered funds dropped to 61% in 2006 from 87% in 2005.  The average loss on new-account fraud—where criminals use the data they’ve stolen to open new credit card or bank accounts—was $5,962 in 2006, a jump of 223% over 2005’s $2,678.  And unauthorized charges to credit cards leaped nearly fourfold, to an average last year of $2,550.

“Hackers are exploiting Internet auctions, money transfers like Western Union and PayPal, the ability to impersonate lottery and sweepstake contests, and other types of imaginative scams,” said Litan.  “They’re going after the weakest links, the consumers using social engineering tactics, and the U.S.‘s payment systems at retail and businesses.”  “Banks eat the fraud there,” at least for now, said Litan.

A Massachusetts state lawmaker, however, has proposed a bill that would hold retailers financially responsible for breaches.  “The retailers are already paying for fraud” in the form of higher interchange charges, Litan said.  She offered up examples of how that might be done, including more sophisticated authentication on debit cards and payment processors relying on identity scoring systems that were able to spot thieves using indicators like physical location.

Posted on 03/07