A recent Gartner study surveyed 5,000 U.S. adults to gauge identity and financial fraud in this country, and the results were pretty astounding. Here are some of the key findings:
- 7.5% of American adults lost money from financial fraud in 2008. That means approximately 1 in 13 people were targeted by a fraudster.
- Payment fraud (i.e. credit, debit, and ATM card fraud) is the leading type of financial fraud.
- Data breaches are the #1 way that criminals obtain your personal data. (This contrasts with the Javelin study that found only 11% of stolen personal data to come from data breaches.)
- New-account fraud yields an average of $1,097 per incident for the criminal, of which victims usually only recoup 42%.
- Credit card fraud losses average $929 per incident, but victims on average are able to recoup 86% of that amount.
- New-account fraud is the most difficult to recover from; 35% of its victims suffer damage to their credit rating, which can take years to restore.
- Less than one-third of financial fraud victims report the crime to law authorities, and only 5% report it to the Federal Trade Commission.
- There is less than a .5% chance of a criminal getting arrested and convicted for an identity-theft-related crime.
This study contains plenty of bad news for consumers. First, there’s the fact that criminals are defrauding 7.5% of our population, and the vast majority of these crooks will never be punished, or even found.
Second, these criminals are primarily getting our personal information by hacking into corporate databases, something which we as consumers have very little control over. We can protect our personal information around our home, but not once it’s in the hands of banks and businesses.
And third, while credit card fraud is the most common type of financial fraud, new-account fraud is the most financially damaging (see the above chart). Victims of new-account fraud are not only liable for an average of $636, but many of them must also suffer a drop in their credit score.
So is there any fail-safe defense against identity theft and financial fraud?
The truth is, there’s not. But the more vigilant you are over your bank accounts and credit reports, the quicker you can find fraud if and when it does occur. Too many victims go months and years without knowing an identity thief has struck. Closely inspect your credit card and bank account statements each month. And catch new-account fraud as early as possible by checking your credit report often (or hiring a credit monitoring service to check it for you). The quicker you can find fraud and take steps to remedy the damage, the less impact it will have on your overall credit and financial health.