- The Washington Times - Wednesday, September 3, 2003

More than 27 million Americans have had some amount of personal information stolen from them in the past five years, the Federal Trade Commission said yesterday, and nearly 10 million people have been victims of identity theft in the last year alone.

The FTC released the first large government-sponsored survey on identity theft and said the problem is far worse than officials had believed. Last year, the crime cost consumers more than $5 billion in expenses, while costing banks and other businesses $48 billion.

Victims of identity theft spent nearly 300 million hours total and an average of $500 each trying to resolve problems when personal information — such as credit-card or checking-account numbers — were stolen.

“Identity theft is a big-ticket item in terms of money and time,” said Howard Beales, director of the FTC’s Bureau of Consumer Protection. “We had never been clear and we had never had any previous reliable estimates to the problem. [These figures] were considerably higher than I expected.”

The FTC randomly surveyed 4,057 adults by phone in March and April. Based on the responses, the FTC estimated that 9.9 million people, or 4.6 percent of the population, were victims of identity theft in 2002 or the first two months of 2003.

More than half of those people said they had information stolen relating to current credit cards or other accounts, while an estimated 3.2 million people have had someone illegally open a new account or commit other fraud in their name.

The FTC said a thief who steals personal information and uses it to open a new account can often cause more financial damage and hassle than if he had stolen existing account information. Twenty-nine percent of victims reporting fraud involving new accounts said they spent 40 hours or more resolving the issue, compared with just 7 percent of victims who suffered thefts involving existing accounts.

Thieves stealing information to create new accounts got $5,000 or more in 36 percent of cases, compared with 6 percent for those who used existing accounts.

The FTC said consumers are often unaware that new accounts have been opened using their names and find out only when they see copies of their credit reports. The agency has pushed for credit reports to be made available to consumers for free.

The agency also reiterated its support yesterday for a universal standard of “red flags” that would help bank regulators spot identity-theft cases, and said identity-theft laws should be strengthened to make prosecution easier.

Private-sector officials working to fight identity theft said more resources should be devoted to investigating identity-theft claims and that businesses should be more careful when handling consumers’ personal information.

“The consumer cannot completely eliminate his exposure to identity fraud,” said Jim Vaules, a fraud consultant for LexisNexis Risk Management and a former special agent in the FBI’s white-collar crime program. “The laws are there now. It’s the resources, and do you have the people do go out and investigate?”

On Tuesday, several notable companies including Amazon.com, Ebay and Microsoft formed a group to cut down on identity theft. The Coalition on Online Identity Theft will start a public education campaign and will encourage its members to work more closely with law-enforcement officials.

The FTC said the Internet has made it easier for identity thieves to find and distribute personal information. In July, the commission warned about a practice known as “phishing,” in which someone creates a Web site pretending to be a legitimate company and asks for personal information including credit-card, Social Security and personal identification numbers.

“There are clearly hazards on the Internet, because consumers can end up on a site that is something other than they think it is,” Mr. Beales said.

But he said there was no reason to believe that the Internet has become an unreliable place for commerce. He said the FTC did not discover a single case of identity theft when standard security measures were in place.

The FTC said most identity-theft victims will not pay any money out of pocket in the end. About 63 percent of victims over the last five years said they paid no money, with the average victim paying $500. Victims who noticed the fraud within six months were far less likely to incur out-of-pocket expenses than those who discovered it later, the FTC said.

To prevent identity theft, the FTC encourages consumers to share personal information only with people they trust and make online purchases with legitimate retailers that use secure connections.

If victimized, consumers are encouraged to contact any company that would be able to close or block access to the affected account, such as a credit-card company. They are also instructed to file a report with the local police.

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