Data Security & Privacy

2007 Consumer Fraud & Identity Theft Report

 
The Federal Trade Commission in February, 2008, released complaint data on consumer fraud and identity theft in the United States for the year 2007.  Consumer Sentinel is a database established to monitor consumer fraud and identity theft complaints reported to the FTC and over 125 other organizations.  The report is strictly limited to self-reported and unverified consumer complaint’s in the FTC database.  In 2007, credit card fraud was the most common form of identity theft (23%), followed by phone/utilities fraud (18%), employment fraud (14%), and bank fraud (13%).  Identity theft resulting from government documents/benefits was alarmingly high for 2007 at 11%.  The year 2007 also saw over $1.2 billion in consumer reported fraud losses where the median monetary loss was $349, and 89% of the consumers reported an amount paid.   Fraud-related complaints in 2007 were up 5% to 555,472 cases, but identity theft reported complaints dropped 5% to 258,427 cases.  These statistics are somewhat misleading, because 2007 saw an overall rise in reported consumer fraud/identity theft complaints from 674,283 cases in 2006 to 813,899 cases in 2007.
 
After years of languishing in the Top 10 in the U.S. for reported identity theft cases, the State of Washington, dropped to 13th in the nation for this category.  Unfortunately, the State of Washington jumped to 2nd in the nation for reported consumer fraud cases (Colorado being #1).  Victims of consumer fraud in Washington State paid almost $40 million, with an average amount of $2,925 per victim (11 consumers reported an amount paid of $1 million or more!).  Olympia, WA, ranked 22nd in the nation for consumer fraud complaints in large metropolitan areas.
 
Unless companies establish corporate safeguards and policies that outline how customer information is going to be protected, then many businesses in the State of Washington will be subjected to fines and penalties.  However, corporate liability and exposure won’t end with just a monetary loss, market credibility of the organization will all but be destroyed, and a forecast of lost revenue will be the result of improper safeguards.  Ways to minimize corporate exposure and liability is to have a professional risk assessment done which identifies areas of strength and weakness in a corporate infrastructure.
 
Regrettably, there is no sure fire way of preventing fraud and identity theft from occurring, but the greater attention a company spends in trying to alleviate the problem, the better chance a company has in meeting their duty of care.  I recently spoke with the Chuck Harwood, Director of the Federal Trade Commission in the Pacific NW Region, and I asked him, what type of company could be subjected to fines/penalties for improperly safeguarding consumer information.  He said that the focus will be on large, egregious cases of misconduct and not on the accidental cases of exposure.  Case law seems to support this FTC policy, as there are very few prosecutions under laws like Gramm-Leach-Bliley Act, HIPAA, FACTA, or some of the other 40 laws aimed at privacy protection.
 
Nonetheless, public perception can be a strong deterence for any company to want to adopt a corporate safeguarding program for customer information.  To view the FTC report on consumer fraud and identity theft click here:  Consumer Sentinel – 2007 Identity Theft and Consumer Fraud Report
 

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