ID fraud incidents decline in 2010, but costs go up

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Incidents of identity fraud declined last year, but the cost per incident rose, and consumers are taking longer to respond to occurrences of theft, according to a survey released Tuesday by Javelin Strategy & Research.

The eighth annual “2011 Identity Fraud Survey Report,” which polled 5,000 U.S. adults, concluded that the number of identity fraud incidents decreased 28 percent in 2010. Overall, 8.1 million U.S. adults fell victim to identity fraud in 2010, down from 11.1 million in 2009, according to the report.

The decrease may be attributed to a decline in the number of reported data breach incidents in 2010, according to the study. Seven percent of respondents said they were notified of a breach last year, down from 11 percent who were notified in 2009.

The number of publicly reported breaches has decreased by nearly one third – from 604 incidents involving 221 million records in 2009 to 407 incidents involving 26 million records last year, according to the study, which cites data from datalossdb.org.

Moreover, total fraud losses decreased from $56 billion in 2009 to $37 billion in 2010 last year, according to the Javelin study.

“The fact that identity fraud is down is a good thing,” Steve Schwartz, executive vice president of consumer services for risk management services provider Intersections, which sponsored the study, told SCMagazineUS.com on Tuesday. “It could mean that consumers and institutions have taken notice, and are doing things to help mitigate the crime. We don't want people to say, though, that it is down and I can relax because we don't think that's the case at all.”

However, while the study showed that total fraud losses were down, the mean consumer out-of-pocket costs per incident went up 66 percent to $631 per incident.

The increase can be attributed to a shift that has occurred in the type of fraud that is being conducted, James Van Dyke, president and founder of Javelin Strategy & Research, told SCMagazineUS.com on Tuesday.

The misuse of existing credit card numbers, the type of fraud considered least damaging to consumers because it generally is covered by a bank's zero-liability protections, declined significantly last year, Van Dyke said. During the same period, however, the rate of new account fraud, which occurs when a fraudster establishes a new account in a victim's name, remained steady.

New account fraud is often harder to detect and results in longer periods of misuse than other types of fraud, driving up the mean cost of fraud losses.

"Criminals move around to the areas that are most lucrative and easiest to get at," Schwartz said.

Meanwhile, the average fraud resolution time rose to 33 hours in 2010, from 21 hours the year prior, likely because instances of debit card fraud are becoming more complicated and fewer consumers are enrolling in identity protection services due to economic constraints, according to the study.

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