III. Identity Theft Patterns
Numerous agencies and organizations collect data on identity theft, including government agencies, nonprofit organizations/ advocacy groups, popular trade and media sources, and credit reporting agencies. However, the use of varying definitions of identity theft and methodologies used by these data collectors produce varying estimates of the extent of identity theft and its costs to businesses and citizens.
Pursuant to the ITADA, the FTC began compiling consumer complaints related to identity theft in 1999. The data are collected from victims who report their victimization via phone or the FTC Web site. Included in the database is information about the victim, contact information for the local police department that took the victim’s report, type of offense, and the companies involved. The database is made available to all law enforcement agencies in an effort to assist in their investigations of identity theft cases. Officers have access to information about identity theft offenders and victims, including details of their experiences.
A second source of data on identity theft is the Internet Crime Complaint Center (IC3), an alliance between the National White Collar Crime Center (NW3) and the Federal Bureau of Investigation (FBI). The IC3 receives complaints related to all Internet crime, including identity theft. Data are collected online and include information on the victim and offender by state, demographic characteristics, monetary losses, and law enforcement contact. Complaints are submitted from either the person who believes he or she was defrauded or from a third party to the complainant.
Several nonprofit and for-profit research groups such as the California Public Interest Research Group (CALPIRG), Javelin Strategy & Research, Gartner Inc., Harris Interactive, and the Identity Theft Resource Center (ITRC) have also collected data on identity theft through Internet, mail, and telephone surveys and face-to-face interviews. The data collected by these groups are based on information from victims of identity theft. Although not as long running and extensive as the FTC’s data collection program, the ITRC has conducted annual victimization surveys since 2003, but these surveys are limited to “confirmed” victims of identity theft who have worked with the ITRC. In addition, CALPIRG has conducted a study of police officers and their experiences with identity theft cases.
A. Extent of Identity Theft
In 2007, the FTC released a report on estimates of the incidence and costs of identity theft. According to the report, approximately 8 million people experienced identity theft in 2005 and total losses were nearly $16 billion (Synovate, 2007). Estimates from the NCVS vary from the FTC report. According to the NCVS, in 2005, an estimated 6.4 million households, representing 5.5% of the households in the United States, discovered that at least one member of the household had been the victim of identity theft during the previous 6 months. The estimated financial loss reported by victimized households was about $3.2 billion (BJS, 2006).
It is difficult to ascertain the financial costs of identity theft since estimates vary across the available data. However, all indicate that this is an extremely costly crime. According to estimates from the FTC’s Identity Theft Clearinghouse, the total financial cost of identity theft is over $50 billion a year, with the average loss to businesses being $4,800 per incident and an average of $500 of out-of-pocket expenses to the victim whose identity was misused (Synovate, 2003). In the 2006 survey, estimates were considerably lower with the average amount obtained by the offender equal to $1,882 and the average victim loss totaling $371 (Synovate, 2007). The FTC cautions, however, that these changes may be attributed to differences in methodology between the 2003 and 2006 surveys. According to the most recent data from the NCVS (BJS, 2007), the estimated loss for all types of identity theft reported by victimized households averaged $1,620 per household. Households that experienced misuse of personal information reported an average loss of $4,850, while theft of existing credit card accounts resulted in the lowest average losses ($980). These figures represent losses that may or may not have been covered by a financial institution, such as a credit card company.
It is also difficult to get a clear assessment of the actual costs incurred by victims of identity theft. In most cases, the victim whose information was misused is not legally responsible for the costs of the fraudulent transaction by identity thieves; rather, it is typically the credit card company or merchants who lose money. Victims may incur expenses from time spent resolving problems created by the theft. These problems may include the need to close existing accounts and open new ones, disputing charges with merchants, and monitoring their credit reports. A survey with CALPIRG found that the average amount of time spent by victims to regain financial health was 175 hours, which takes an average of 2 years to complete. According to the Identity Theft Resource Center’s 2003 survey, the average time spent by victims clearing their financial records is close to 600 hours. In addition to time spent resolving problems created by the identity theft, victims may experience a great deal of emotional distress, including feelings of anger, helplessness and mistrust, disturbed sleep patterns, and a feeling of lack of security (Davis & Stevenson, 2004).
B. Regional Variation
It appears that residents in certain regions of the United States are at a heightened risk of being victimized. According to the FTC (2007) data, Arizona (147.8), District of Columbia (131.5), Nevada (120.0), California (113.5), and Texas (110.6) had the highest identity theft victimization rates per 100,000 residents, while the lowest victimization rates were reported in West Virginia (39.3), Iowa (34.9), South Dakota (30.2), North Dakota (29.7), and Vermont (28.5). The NCVS data demonstrated that households in the West were approximately 1.5 times more likely than those in the Northeast, Midwest, or South to experience identity theft, and urban (6%) and suburban (6%) households were more likely to have a member experience identity theft than rural households (4%) (BJS, 2007). Many have blamed the methamphetamine epidemic in the Western United States for this finding. However, this link has not been substantiated with sound research and data.
C. Clearance Rates
Clearance rates (percentage of crimes for which an arrest is made) for identity theft are low. Available evidence suggests that offenders are seldom detected and rarely apprehended. Allison, Schuck, and Lersch (2005) reported an average clearance rate of 11% over a 3-year period. Similarly, law enforcement officials interviewed by Owens (2004) and Gayer (2003) estimated that only 10 and 11%, respectively, of identity theft cases received by their departments were solved. There are several obstacles that make the investigation of identity theft cases and the likelihood of arrests difficult (U.S. GAO, 2002). For example, identity theft cases can be highly complex, or the offender may have committed the theft in a different jurisdiction from where the victim resides, making it difficult to secure an arrest warrant. In addition, departmental resources may be directed toward the investigation of violent and drug-related offenses rather than identity thefts.