Identity Theft Grows More Costly for Victims

Identity theft is claiming fewer victims, but the damage from this fraud is growing more costly for consumers, reversing a downward trend in recent years, according to a report released Tuesday.

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Javelin Strategy & Research's annual study of identity fraudshowed the number of victims in the US fell last year by 28 percent to 8.1 million adults—or the lowest level since 2007. The total value of the fraud was cut by more than a third, dropping to $37 billion from $56 billion.

However, the out-of-pocket costs for consumers rose significantly last year due to a shift in the type of fraud being committed. On average, identity theft cost victims about $631 per incident last year, up 63 percent from the prior year.

One reason for the increased burden on the consumer is due to a shift in the types of fraud being committed. Last year, the bulk of the cases were incidents that involved the creation of new accounts using a person's identity without the victim's knowledge. This is the hardest type of fraud to detect, and it often goes on longer before it is caught.

Another trend was that a bigger share of the identity theft was being conducted by people that were known by the victim such as family members, friends or co-workers. This so-called friendly fraud, grew 7 percent last year, with consumers between the ages of 25 and 34 years old were the most likely victims.

This age group is susceptible because they are most likely to report that their Social Security numbers were stolen. In fact, 41 percent of the victims in this age group reported their Social Security number had been snagged.

The economy appears to be shaping characteristics of identity fraud, according to Jim Van Dyke, president and founder of Javelin.

Javelin found an inverse correlation between retail sales figures and the incidence of fraud. This suggests as people feel more comfortable about the economy, they are less likely to commit fraud.

Signs of a tough economy did leave their mark on the trends. Last year, there was a shift toward fraudsters using the victim's identity for home phone or cable service rather than looking to open new credit card accounts, as has been the case in the past.

No doubt controls put in place by banks are helping to deter identity theft, but with the cost to the consumer rising, everyone needs to be vigilant.

"Consumers cannot put their finances on autopilot or ignore important safeguards," Van Dyke said. "Simple safeguards may dramatically reduce fraud risk, such as frequently monitoring banking, credit and other financial activities, securing computers and paper records, and activating electronic alerts to help prevent fraud and address the situation quickly when it occurs."

For example, many consumers tend to grow complacent when they are notified by a bank about a breach of their information, Van Dyke said.

"People take the notice as some sort of assurance of safety that there is some force out there that is protecting them," he said. But there is not.

Many times, banks and other institutions will offer credit protection services to customers who had their files compromised. However, a very low number of consumers actually take advantage of such offers.

That's a bad idea.

If you receive a notice that one of your accounts has been breached, you are between six- and seven-times more likely to become a victim of fraud, Van Dyke said.

Van Dyke also said that older Americans who use social media such as Facebook are more likely to not take advantage of the available privacy settings and that can be a mistake.

Wells Fargo , helps sponsor the Javelin study, has more information on how to protect against identity theft on its Web site.

Javelin also has a quiz you can take that can help you know whether you are putting your identity at risk.

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