Reduction in ID-Fraud Losses Surpasses Decrease in Fraud Victims, Study Finds

Some 12.7 million Americans fell victim to identity fraud last year, a big number but down 3% from 13.1 million in 2013, according to Javelin Strategy and Research’s latest annual ID-fraud study. Even better, estimated fraud losses fell 11% to $16 billion from $18 billion in 2013.

While those decreases are encouraging, fraud obviously is far from being a tamed beast. The percentage of Americans victimized by ID fraud has remained steady for the past three years, coming in at 5.2% in 2014 versus 5.4% in 2013 and 5.3% in 2012.

But any improvement in the number of victims and losses is good news, especially after a year when the number of consumers notified that their personal data had been compromised jumped 160% to 61.8 million from 23.8 million in 2013, according to the study. James Van Dyke, chief executive at Pleasanton, Calif.-based Javelin, attributes the reductions to consumers becoming increasingly aware of potential fraud to industry’s greater use of real-time and interactive technology to spot suspect transactions and cut off fraud early.

“It’s a combination of increased vigilance on the part of consumers, certainly…but it’s also the providers that are taking advantage of a lot of the tools,” Van Dyke tells Digital Transactions News.

In contrast to some analysts that tally up records exposed in publicly reported data breaches, Javelin gets its data from a representative sample of 5,000 adults, including households with no land lines or access to the Internet. The survey covers fraud using items that could identify a consumer, including debit and credit cards, and demand-deposit and other types of bank-account numbers.

The mean and median amounts of fraud per victim fell in 2014 to $1,228 and $293, respectively, down 13% and 9%. Fraud on existing payment cards is the most common type of ID fraud, and the median consumer out-of-pocket cost from such fraud remained at zero in 2014, as it has for years. That’s because of card issuers’ and financial institutions’ zero-liability policies. But many consumers do take a financial hit, Van Dyke notes. The mean out-of-pocket cost for all victims last year was $115, barely changed from $114 in 2013 but well below the $365 average found in the 2012 survey.

“Mean fraud amount has been steadily dropping just a bit, but this urban legend never dies that consumers pay nothing,” says Van Dyke.

Drill down to non-card types of ID fraud and you’ll find that many consumers pay far more than $115. For example, the mean consumer cost on existing non-card account fraud was $273 last year, up from $207 in 2013. New-account fraud, when a criminal creates a new financial account using stolen credentials, results in an average cost per victim of $398 on a mean of $3,232 in fraud. And account takeovers by fraudsters result in a mean cost to the victim of $411 on $2,542 in average fraud per incident.

The 2014 survey was sponsored by Tempe, Ariz.-based LifeLock Inc., a provider of ID-theft protection products for consumers and fraud and risk-management services for businesses.