Just how common is ID theft?

Consumer protections vary
Avivah Litan, who conducted Gartner's study, said it was important to draw distinctions between simpler and more involved kinds of identity-based fraud.

"Maybe these surveys are doing a disservice to the public by lumping everything together," Litan said.  "But on the other hand, that's how consumers think about it. I think it is fair to call everything ID theft if you look at it from the consumer perspective."

Even simple credit card fraud isn't so simple, Litan said. A thief who hacks a database of stolen credit cards may have victim's home addresses, too — and have stolen items shipped to their house.  Consumers who must cancel cards have to endure the hassle of re-establishing automatic payments, and may find their cards suddenly don't work while on a business trip or vacation.

And when a debit card number is stolen, consumers have additional problems.  Rights to recover lost funds are weaker. And unlike credit card fraud, the money is drained immediately from a victim's bank account, and it's up to the victim to get the bank to replace it.  With credit card fraud, victims simply don't pay for the disputed charges on a bill.

Meanwhile, more severe cases of ID theft are far more common that the retail and credit industries would like people to believe, said Rob Douglas, who operates PrivacyToday.org.

"To say the numbers are hyped is ridiculous," Douglas said. "Statements like that demonstrate that they don't get it. [Duncan] seems quite cavalier about this and maybe that's why we have the problem."

Slow to recognize the problem
American financial institutions were slow to recognize or acknowledge the severity of the problem in the early part of this decade, even as the FTC repeatedly said ID theft was its top-reported fraud, and the Justice Department called it America's fastest-growing white-collar crime.

One reason why may be simply a matter of human error. Consumers often don't spot ID theft for months. Meanwhile, criminals who open new credit cards simply don't pay the bills. The fraudulent accounts go unpaid for months, and eventually are written off as bad debts by banks — long before the trail leads to identity theft. A 2003 study by ID Analytics reported that in 7 out of 8 cases, credit card firms, cell phone companies, and other lenders misidentified ID theft as unpaid bills.

To Westin, the numbers are only part of the story. What's most important is the trendline, he said. In a study he conducted two years ago, there were 35 million victims — 9 million fewer than this year's study. That increase occurred despite the Fair and Accurate Credit Transaction Act, passed by Congress and signed by President Bush at the end of 2003. The law was full of provisions designed to stem ID theft, like a free annual credit report and additional consumer rights.

The continued increase is a trend worth getting worried about, he said.

"Despite all of the things that have been done by government and business, all the efforts to tell people what they can do to protect themselves," Westin said. "Despite those things, it's still rising."

Bob Sullivan is author of Your Evil Twin: Behind the Identity Theft Epidemic

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