Pierluigi Paganini March 05, 2015

The annual study published by Javelin Strategy & Research on identity fraud estimates that U.S. consumers actually suffered fewer losses than in the past.

Last year we observed a significant number of data breaches that cause the exposure of a huge quantity of information in the criminal ecosystem. According to the 2015 Identity Fraud Study (“2015 IDENTITY FRAUD: Protecting Vulnerable Populations“) conducted by Javelin Strategy & Research the number identity fraud victims is dropping by three percent from 2013.

Javelin estimates that in the US 12.7 million U.S. consumers were victimized in identity theft last year 2014, meanwhile in 2013 the number of victims was 13.1 million. It’s a good news if we also consider that the total fraud losses dropped from $18 billion in 2013 to $16 billion in 2014 (-12,5%). The study analyzes identity fraud trends for the twelfth consecutive year, it is one of the most interesting study of identity fraud available on the market.

Identity thefts have a significant impact on the finances and spending habits of the victims. According to a survey conducted by Javelin, 28 percent of the 5,000 people interviewed confirmed to avoid merchants after being victims of an identity fraud.

In particular, the Javelin report highlights a significant decrease in fraud based on creating new accounts in the name of the victims. This is a good news, but the worrying observation is that victims take a long time to discover that they have been victims of an identity theft.

The identity fraud study revealed that students are the category with a low perception of the threat, with more than 64 percent saying they were not very concerned about fraud, this makes them privileged victims of the cybercrime.

The 2015 Identity Fraud Study found several significant trends, including:

• Incremental decrease in victims doesn’t tell the whole story – The number of victims of identity fraud decreased by 3 percent from 13.1 million in 2013 to 12.7 million in 2014.  But progress has been made with total fraud losses declining to $16 billion in 2014, a decrease of 11 percent from 2013 ($18 billion). This decrease is attributable to the combined efforts of industry, consumers, and monitoring and protection systems that are catching fraud more quickly.
• Students least concerned yet most severely impacted by fraud – Among several demographic segments analyzed, students indicated the least amount of concern about fraud occurring, with more than 64 percent saying they were not very concerned about fraud. Yet, this same group is more likely to perceive significant effects due to the occurrence of fraud (15 percent experiencing moderate or severe impact). Students are also the least likely to detect identity fraud themselves. In fact, 22 percent of students were notified that they were a victim of identity fraud either by a debt collector or when they were denied credit, three times higher than average fraud victims. Students are also four times more likely to be victims of “familiar” fraud, versus all other consumers.
• Fraud victims avoiding retailers – 2014 saw a significant amount of data breaches, most notably from retailers Neiman Marcus, Home Depot, Staples and Michael’s, as well as financial institution JPMorgan Chase. These breaches had a great impact on consumer purchasing decisions, with 28 percent of fraud victims saying they avoided merchants post-fraud. Notably, individuals whose credit or debit cards were breached in the past year were nearly three times more likely to be an identity fraud victim. This highlights the need for increased security, vigilance and quick response by retailers.
• New account fraud going undetected – New account fraud reached record lows in 2014, yet the study showed that victims of new account fraud are three times more likely to take a year or more to discover that their identities were misused compared to other types of fraud, such as existing non-card accounts. This can open the door for fraudsters to be able to use the victim’s identity for illicit behavior for a long period of time, which can result in greater harm to consumers in the form of financial losses, and problems with their credit history and scores. These findings reinforce the need for consumers to actively monitor their identities and accounts.

Pierluigi Paganini

(Security Affairs –  identity fraud, cybercrime)