ID fraud down, says research firm

A new study has found that ID fraud is dropping in the US.

Despite widespread media coverage of data breaches over the past year, identity fraud is actually dropping in the U.S., Javelin Strategy & Research Inc. reported Thursday.

In fact, the cost of identity fraud was down 12 percent from Javelin's 2006 survey, at an estimated US$49.3 billion in losses. The number one source of ID fraud? A lost or stolen credit card.

"ID fraud is down," said James VanDyke, Javelin's president and founder. "It hasn't been growing for several years, but we hadn't seen it drop."

Nationwide, there were about 500,000 fewer victims, according to this year's survey, VanDyke said.

Much of the drop can be attributed to improved antifraud practices on the part of consumers and businesses, he said. "Businesses are doing a better job of not granting new accounts [to criminals]," he said. And consumers are also monitoring their account activity more closely and reporting suspicious transactions to the banks much more quickly.

Javelin based its findings on 5,000 telephone interviews with U.S residents conducted over three weeks last October. The survey follows a methodology established by the U.S. Federal Trade Commission, which released a similar study back in 2003. The Javelin research was sponsored by CheckFree Corp., Visa USA Inc. and Wells Fargo & Co.

The survey's findings are at odds with those of research firm Gartner Inc., which has reported that ID theft is on the rise.

But VanDyke says that this is because Javelin's numbers include responses from a wider range of people, including those who lack Internet access. "Thirty percent of people in the U.S. are not on the Internet, and those people have a vastly different way of managing their finances," he said.

According to Javelin, there are also important differences between the way rich and poor people react to ID theft, something that VanDyke describes as a "fraud detection digital divide."

"The low-income people essentially run away from purchases and they run away from the Internet," Van Dyke said. Affluent people, on the other hand, tend to embrace the Internet as a way to avoid having sensitive data stolen from the mail, and to keep tabs on their account activity, he said.

Mail theft accounted for about 9 percent of all ID compromises. That's more victims than data breaches and phishing combined, according to Javelin's numbers.

Javelin also found that young adults between the ages of 18 and 24 were at greater risk of ID theft, with more than 5 percent of respondents having been victimized. "They're being haphazard and as a result, they're being victimized," VanDyke said. "They're not protecting their PCs with antivirus software and firewalls.

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