Identity Theft: How Much Should You Worry?

Author: Daniel Harris

Of the more than 2 million consumer complaints that the Federal Trade Commission collected during 2013, 14%, or roughly 280,000, were related to identity theft.

What Kind of Fraud

One-third of these ID theft complaints reported fraud related to government documents or benefits. Credit card fraud complaints contributed another 17%; phone or utilities fraud, 14%; bank fraud complaints made up 8%; another 6% concerned employment-related fraud and 4% were regarding loan fraud. Javelin Strategy and Research's 2014 Identity Fraud Study reports that ID fraud criminals stole $18 billion in 2013, a decrease from $21 billion in 2012,

While that still sounds like a lot of complaints and lost money, only about 7% of U.S. residents age 16 or older experienced identity theft in 2012, according to the Bureau of Justice Statistics' 2012 National Crime Victimization Survey. Nevertheless, that's a lot of people: almost 16.6 million, according to the survey.

How Much Money People Lose

The good news is that the vast majority of identity-theft victims didn't ultimately lose money. Only 14% in the 2012 study experienced a financial loss for which they were not reimbursed, and just half of that group lost $100 or more. Only 16% of that 14% group (about 2% of all the victims) lost $1,000 or more that was not reimbursed.

In addition, very few identity theft victims had legal problems as a result of identity theft. And 86% of respondents said they had not experienced any incident of ID theft during their lifetime. With numbers like these, maybe we're more afraid of identity theft than we need to be.

How Much Time People Lose

Still, lost time and hassle can be significant problems for ID theft victims, who spend an average of 9 hours fixing the problem. The worst trouble happened to the 1.1 million who reported someone used their personal information to fraudulently open a new account – that took an average of 30 hours. The average for credit card account misuse victims: 3 hours.

For 7% of the victims surveyed, ID theft resolution had taken longer than one year. Of course, this statistic doesn't give us any idea how many hours these victims spent on the problem. Were they making 10 phone calls a day taking up two hours every business day for the entire year? Or did they write one letter a month? The survey also found that about half of respondents were able to resolve the problem in a day or less.

How People Find Out

The most common way consumers discovered they were victims was when a financial institution contacted them. About two-thirds of all victims did not know how their information had been stolen, and about 90% did not think they knew anything about the thief.

The identity theft crime you're most likely by far to experience is the use or attempted use of an existing credit card or bank account. These two types of fraud occurred at about the same rate in the period the survey covered. Consumer Reports points out that 80% of consumer-reported identity theft is the theft of a credit card or debit card number, which is not truly identity theft and which often results in no financial loss to the consumer thanks to fraud protections provided by financial institutions, such as zero liability for unauthorized credit card transactions.

The website of TrustedID, an Equifax company that sells identity theft protection services, states that the average ID theft victim spends more than 500 hours and more than $5,000 to restore his or her credit and good name. . . . Victims spend most of their time filling out paperwork, making phone calls and notarizing affidavits to try to prove their innocence after finding out their identity has been stolen. TrustedID does not state the of these figures, but they're dramatically different from the findings of the Bureau of Justice Statistics' 2012 National Crime Victimization Survey.

How Much Should You Worry?

What should consumers make of these and all the other identity theft statistics they may read? First, consider the : Does the government agency or company propagating the statistics have a vested interest in scaring you (for example, so you'll support new financial regulations or buy their ID theft protection service)? Do all the statistics presented support the agenda of the entity presenting them, or is the approach balanced?

Second, consider the sample size and whether the sample is representative. If the statistics are based on a survey, for example, how many participants were polled and is this number large enough to be meaningful? What types of people make up the sample and who might have been excluded?

A third potential problem that's often difficult to understand is how the survey questions were framed. The company or agency conducting the survey might intentionally or unintentionally ask questions in a way that biases the results. Sometimes it's difficult or impossible to see the actual questions in the survey.

The Bottom Line

Keep in mind that statistics never tell the whole story. Consider what other evidence might support or refute the statistics you're reading. When you see statistics about how much money ID theft victims lost or how much identity thieves stole, for example, look for information about whether the victims were reimbursed for their reported financial losses. They often are, thanks to zero fraud liability on credit card accounts and limited fraud liability on bank accounts.

Also look at how victim is defined, if at all. The entity propagating the statistic might hope that you assume a victim is an individual consumer, but the financial institutions that lose money because of identity theft might also be included in the definition of victim. The threat to you as a consumer may be smaller than the statistics suggest.