By Bob Sullivan Technology correspondent
msnbc.com
updated 1/26/2005 11:47:29 AM ET 2005-01-26T16:47:29

Identity theft continues to afflict millions of U.S. consumers, according to a new study released Wednesday.  About 9.3 million people were victims of the crime last year, the study says, echoing a study last year by the Federal Trade Commission that indicated 10.1 million consumers had been hit in 2003.  In all, one in every 23 consumers were victims last year.

But the study, which was commissioned by the financial industry, came up with a surprising finding, according to its authors. Contrary to popular wisdom, using the Internet may be a consumer's best fraud-fighting tool.  In fact, the study's authors say, the Internet has gotten a bad rap.

"The very thing consumers are most afraid of is actually the thing that makes the account holder safer," said James Van Dyke of Javelin Inc., a research firm that conducted the study. It was sponsored by CheckFree Services Corp., Visa USA, and Wells Fargo Bank.

ID theft victims who noticed the fraud quickly by viewing their accounts online sharply cut their losses, Van Dyke said, so electronic monitoring of accounts is a consumer's best defense.  Study results indicate that consumers who spot fraud online suffer an average theft of about $500.  Consumers who wait for paper records and suffer ID theft suffer average losses of $4,500.

"With ID theft, time is money," he said.

The study  also suggests personal data is usually stolen in offline ways — such as dumpster diving — rather than over the Internet.  Only 12 percent of the victims in the survey believed their information was stolen electronically. Stolen wallets, checkbooks, and mail remain the chief nemesis, Van Dyke said — not brilliant computer hackers who break into online databases of personal information. Signing up for services like electronic banking will reduce the amount of personal mail sent home, reducing consumer risk, Van Dyke said.

Echos FTC study completed last year
Javenlin's survey closely imitated last year's Federal Trade Commission survey, and the results were strikingly similar, said FTC attorney Lois Greisman. She said there were hopeful signs in the results.

"The crime is not growing," she said.  "We're seeing a leveling off and that's where you're going to see your first signs of improvement. I'd like to say this is a positive signal, but the crime is not going away."

Also promising, she said, was a result showing average consumer time spent dealing with personal records cleanup from ID theft is now 28 hours, down from 33 last year.

But she didn't agree with Van Dyke's assertion that online banking makes consumers safer.

"I don't think this survey tells us that if I bank online, I'm safer than if I bank offline," she said.  "I don't read this report to say I'm safer online than offline.  I read it to say here's how a lot of ID theft is occurring."

Gartner fraud analyst Avivah Litan also disagreed with Javelin's conclusion.  The study results come from a telephone survey of 4,000 consumers, with slightly more than 400 reporting they were victims of identity theft. Litan found fault with the author's conclusion that online theft of personal data is rarely the cause of ID theft.

When consumer data is hacked, consumers often don't know, Litan said.

"The general population doesn't really know how the information is stolen especially,  with credit card fraud," she said.  "If you do have a good guess, it usually is because you are in a fight with family member or neighbor.  The study is biased towards people who know how it happened."

Still, Van Dyke maintains that consumers who diligently check their accounts online are in the best position to catch fraud and stem the financial losses and headaches that occur because of it.

"The fact is that nobody is more effective at preventing and protecting fraud than the individual," he said.

Bob Sullivan is the author of  Your Evil Twin: Behind the Identity Theft Epidemic.

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