Home > Identity Theft > The Javelin Conundrum: Making Sense of the Latest Identity Theft Numbers

Comments 0 Comments

PuzzleAt first blush one might be cheered by the results of the newly released Javelin Strategy & Research 2010 Identity Fraud Survey Report.

The Good News

Identity fraud incidents decreased in the United States by 28%. That’s three million less victims than reported in their findings in 2009.

The total overall fraud amount dropped from $56 billion to $37 billion in 2010.

The mean loss per consumer dropped from just under $5,000 to just over $4,600.

[Related article: Surprising New Identity Theft Trend]

But should we be dancing in the streets or at least hopping on the couch like Tom Cruise on Oprah? Well, not exactly. This is one of the earlier studies on the subject that will be released in 2011. The Federal Trade Commission, Ponemon, the Identity Theft Resource Center and Pew (to name a few) will be reporting their findings over the next few months.

Consumers were asked to self-report their victimization and disclose the costs they incurred, but the folks at Gartner weren’t necessarily convinced. According to the “Red Tape Chronicles” blog on MSNBC.com, Gartner analyst Avivah Litan argues that the methodology of the Javelin survey has its “pitfalls” and bank data indicates that fraud is actually up. Frankly, the financial services sector has always been pretty guarded when it comes to such disclosures. UC Berkeley’s Professor Chris Hoofnagle has been quite outspoken over the years about their “close to the vest” disclosure policies, and his groundbreaking study tracking the frequency of bank data breaches is absolutely worth a read.

So before we stand on top of a Times Square skyscraper to release the confetti and dump the vat of Gatorade on the winning coach, allow me to assume my Shiva God of Death persona and reflect a bit on the survey’s darker findings.

The Bad News

The mean out of pocket costs due to identity fraud increased by some 63 percent from $387 per incident in 2009 to $631 per incident in 2010. Javelin attributes this to significant increases in new account fraud and “friendly fraud,” both of which percolate for longer periods of time before detection.

The amount of time required by consumers to resolve an identity fraud incident significantly increased in 2010 – jumping from 21 hours to 33 hours (a whopping 39%).

[Resource: Identity Theft Basics]

While credit card account compromise is significant but dropping, debit card fraud is markedly rising. This is entirely logical. In recent reports, millions of consumers have forsaken credit cards for debit cards – either due to a new sense of frugality, fear of an uncertain economy or because they have been unceremoniously forced out of the credit card market. Banks have crushed consumer credit card utilization over the past 3 years by closing accounts, lowering credit limits, jacking up rates and hiking fees. Their “reign of terror” has pushed and cajoled Americans into debit cards which have few rewards, generate billions from swipe fees, offer less fraud protection than credit cards and provide a wormhole into individual bank accounts.

Do I see sweat on your brow?

New account fraud, which accounts for $17 billion (put your pinky to the edge of your mouth like Dr. Evil when you say that), is on its way to eclipsing existing account fraud. This means that the low hanging fruit has been picked over and the predators have climbed the tree grabbing a sweeter consumable which is tougher to detect and more complicated to resolve.

The Javelin Conundrum (cont.) »

Image: Brad Montgomery, via Flickr.com

Pages: 1 2

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team