WASHINGTON – As the holiday season makes its official debut this week, law enforcement and consumer officials say that people will be prone to identity theft over the next few anxious, frenzied, credit-card-swiping weeks.
"Identity theft in general should be a huge concern for everybody. It's one of those crimes where you can do everything right and still be a victim," said Consumers Union policy analyst Susanna Montezemolo. "It becomes more of a concern during the holiday shopping season."
Identity theft — taking someone’s vital identification information like Social Security numbers, bank account numbers and credit history without the person’s permission and using it for fraudulent purposes — is becoming one of the most prevalent crimes in the United States, according to the Federal Trade Commission.
In a 2003 report commissioned by the FTC, it was estimated that nearly 10 million people that year had been identity theft victims.
This year was a high-water mark for massive private-data security breaches, a problematic identity-theft precursor, leading lawmakers in the House and Senate to introduce more than one dozen bills aimed specifically at preventing identity theft.
Some non-identity theft-related bills have aimed at tightening up some rules, but none of the identity theft-specific bills has become law, giving identity thieves a reprieve on that front at least until early 2006.
Why You Should Worry About ID Theft
The FTC's Betsy Broder, an assistant director in the agency's bureau of consumer protection, said identity theft is harmful because it leads to two types of fraud.
The first type of fraud — using someone’s identity to steal money from current bank and credit accounts — is the most common, but less damaging than the second type of identity theft fraud, which consists in using someone’s stolen identity to create new accounts.
In the first case, say you lose your wallet. An identity thief takes your credit card number, goes online, and buys a $1,000 lawnmower. You’ve canceled your credit cards, but not before owing $1,000 for a lawnmower you didn’t buy.
The FTC estimated in 2003 this type of fraud happened to about two-thirds of identity theft victims. Because personal liability is limited, the FTC estimates the average cost to victims in this case was about $160, and $2,100 to businesses and financial institutions for a total of about $52 billion. That doesn’t include the hidden price of rising costs passed onto consumers because of theft.
The second type of fraud, while less common, is more damaging and more difficult to discover. Imagine someone leafing through your discarded bank statements, lifting your bank account information, establishing a credit account, and finally defaulting on the loaned money.
In that case, you don't find out until a loan has been rejected, or you begin getting calls from creditors you didn't know you had. Your credit history has been damaged, maybe your ID fraud artist has established multiple accounts, and you don’t know when the artist will strike next. The FTC estimates this type of fraud costs an average of $1,180 per ID theft victim, and $10,200 per business and financial institutions.
But this year a number of security breaches in major data collection institutions — including ChoicePoint, LexisNexis and MasterCard — allowed some crafty fraud artists to retrieve millions of secure files containing the personal data that can lead to identity theft.
Industry watchdog groups estimate that the breaches led to a lifting of personally sensitive information from 50 million U.S. residents. A few hundred actual fraud cases so far have been linked to the ChoicePoint breach, although because of the nature of identity theft, the true number of victims is likely larger.
"It's a major issue in that it's a very difficult one to investigate," said Mary Ann Viverette, International Association of Chiefs of Police president and the Gaithersburg, Md., police chief. "It's rare that you see bank robberies any more," she said. Identity theft is a lot easier.
"We’re concerned with victims, and most of the credit card companies are saying this is such a small percentage of our profit, that they just write it off as a loss. But the police department still has a victim to deal with," victims who Viverette said can be trying to re-establish their lines of credit for 10 years.
Viverette said police departments around the nation just don't have the officers available for identity theft investigations, which take a lot of resources to prove. That puts departments in an uncomfortable position of pursuing the cases where there's the "most bang for the buck."
"It's just an impossible resource requirement on law enforcement agencies to follow up on every one of them," Viverette said.
Viverette said that as the holiday shopping trends take hold of the nation for the next few weeks, shoppers should continue to be careful. She said to keep your important pieces of information close to you and destroy the ones you need to throw out.
Carry only what you need to the malls. If you use a credit card at a restaurant, it's better to go to the cashier so no one uses a "skimming" device to sneak into your accounts, Viverette said. If you can, pay with cash. You should even be careful of what you say in public, because people out to do harm might be listening.
But she also said not to forget about identity theft once you've put away your decorations.
"It's a year-round problem," Viverette said.
Tomorrow: FOXNews.com reports on the progress of ID theft bills in Congress.
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