Home > Identity Theft > Identity Theft Hit an All-Time High in 2016

Comments 0 Comments

Despite years of battling by the financial industry and a massive change in the way Americans use debit and credit cards, the rate of identity theft soared during 2016, a new report has found. In fact, it hit an all-time high.

An estimated 15.4 million consumers were hit with some kind of ID theft last year, according to Javelin Strategy & Research, up from 13.1 million the year before.

The report begins ominously: “2016 will be remembered as a banner year for fraudsters, as numerous measures of identity fraud reached new heights.” Fraud losses totaled $16 billion, the report found.

About 1 in every 16 U.S. adults were victims of ID theft last year (6.15%) — and the incidence rate jumped some 16% year over year. This despite 2016 being the first full year that brick-and-mortar retailers were forced to accept more secure EMV chip cards or face liability consequences.

The shift to EMV was supposed to virtually eliminate one type of ID Theft, card cloning, which allows criminals to steal account data and write it onto counterfeit cards used to make fraudulent in-store purchases. Visa said that part of the EMV has worked: Counterfeit fraud is down 52% at EMV-enabled stores.

Predictably, criminals shifted away from card cloning and toward card-not present fraud — largely online purchases, where chips are not necessary. The Javelin report said card-not-present fraud rose a whopping 40% last year. But the real surprise in the Javelin report is that many other forms of fraud also spiked.

Fraud ‘Anywhere We Looked’

Account takeovers — where a criminal hijacks credentials for an existing account — climbed 31%, Javelin said. New account fraud is up, too, according to Javelin, with incidence rates up 20%.

Even theft involving cell phone account takeovers — which help criminals gain access to financial accounts when consumers utilize two-factor authentication involving a text message or token app — has doubled in the past year.

“Anywhere we looked, we saw that there was just more fraud,” said Al Pascual, head of fraud and security at Javelin.

The Javelin data comes from a statistically significant sample of about 5,000 U.S. consumers. The survey is now in its 14th year; it was initially conducted by the Federal Trade Commission in 2003. This year’s study was paid for by LifeLock, though conducted independently, Javelin said.

The findings square with results published in January by ACI Worldwide, which also indicated that criminal fraud activity was up sharply. Retail fraud attempts rose 31% during the holiday shopping season compared to last year, said ACI, which monitors transactions for fraud.

Analysts also agree fraud attempts are up.

“I’m hearing the same trends from large banks – the percentage of fraud attempts against them is dramatically increasing,” said Avivah Litan, an analyst at Gartner, in response to the ACI report.

The Good News

The story isn’t all bad, according to Javelin. While incidence of crime is up, the dollar amount per victim is steadily dropping, as is the time it takes for many victims to detect ID theft. That’s in part because consumers are utilizing online tools — checking their accounts more frequently — to look for fraud, Pascual said. (You can view your free credit report summary, updated every 14 days, on Credit.com. Signs of identity theft include a sudden drop in credit scores, mysterious credit inquiries and new accounts you didn’t open.)

“I don’t want to make this sound like an all-bad news story,” he said. While total losses — $16 billion — were up slightly over last year, they were still well below the $22 billion record set in 2012.

Still, the dramatic increase in the number of victims raises obvious questions: Why is fraud up, even after these major investments in fraud-fighting technology?

Pascual said the shift to EMV has probably motivated criminals to act fast. For starters, since not all merchants are EMV-ready yet — gas stations still have several years to be compliant, for example — criminals are racing to squeeze the last few dollars out of that fraud scheme.

“(EMV) forces criminals to do things like use up all the counterfeit fraud accounts they have access to,” Pascual said. “It also motivates criminals to look for other kinds of fraud.”

With the easy money of cloned card fraud drying up, thieves are experimenting more and more with account takeovers and new account fraud, he said.

Are EMV Chips at Fault?

“I think it’s a combination of (things),” Litan said, responding to the question of whether EMV chips are to blame. First on her list is the proliferation of “fraud kits” that budding young criminals can purchase and immediately use with little or no experience. There are also far more criminals, she said. Criminals working “double time” to deal with security enhancements like EMV are another factor.

It’s troubling, however, that criminals have been nudged toward the kinds of fraud that makes life more miserable for consumers. Simple credit card fraud is pretty easy to recover from and usually only a call to the bank is required. (You can find a full FAQ on credit card fraud here.) But account takeover or new account fraud are far more complex.

“It’s a continued arms race,” said Stephen Coggeshall, the chief analytics and science officer at Javelin. “We get better with our tools, they continue to migrate … we are not necessarily losing the battle.”

Still, Pascual believes the shift to EMV was worth it.

“Over the long term, if you look at other markets that did this, as long as we are closing windows and doors, improving authentication on existing accounts, it’s a good thing,” he said.

Image: scyther5

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 sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

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.



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