Consumers Take Steps to Thwart ID Thieves
April 21, 2008
Bankrate.com
By Sheyna Steiner
According to media reports, identity theft is a widespread problem -- but do Americans think this applies to them personally? Bankrate's most recent poll reveals that the answer is a resounding yes. In fact, eight out of 10 Americans express worry about having their identities stolen.
In many cases, their concern may be validated by personal knowledge of a victim. One-third of Americans (34 percent) know someone who has been a victim of identity theft. In the Northeast, it's closer to one in four (28 percent) while in the West almost one in two people (44 percent) know an ID theft victim.
Hard to know true number
"That is about what we see when we ask that question in presentations," says Linda Foley, founder and chairman of the board of the Identity Theft Resource Center. "But we know that victims may not share the fact that they have been victimized with anyone due to embarrassment or fear of losing a job."
Because of the broad nature of the crime, the actual number of people who know a victim could be higher or lower, says Avivah Litan, vice president and analyst at Gartner, a technology and research advisory company.
"Everyone has their own definition of 'identity theft,'" says Litan. "For some it means wholesale identity hijacking. For others it could mean credit card theft. So it's hard to know what the respondents were thinking; thus the results could be skewed either way."
Bankrate commissioned GfK Roper to conduct a random survey of American households for this segment of our Financial Literacy series on identity theft. We sought to find out how people protect themselves against this crime and whether it is much of a concern. Interviewers questioned 1,006 adults -- 524 women and 482 men -- about identity theft.
The results show that consumers who personally know a victim of identity fraud tend to be more concerned about the crime overall. Further, their concern pushes them to take more steps toward protecting their personal information, although there does seem to be some ambiguity as to the most efficient privacy protection actions.
"One issue in asking 'concern' questions is that individuals' awareness of a problem can differ radically from their actions to mitigate it," says Chris Hoofnagle, a nationally recognized expert in information privacy law and senior fellow with the Berkeley Center for Law and Technology.
Of those answering the poll, 40 percent identified themselves as being very concerned about identity theft, and 41 percent as somewhat concerned. The number goes up for people who know a victim -- 46 percent are very concerned versus 36 percent for those who do not personally know a crime victim.
"If you asked people if they were concerned about lead in products, they'd probably say yes, but what can they do about it?" Hoofnagle says. "Not buy products from China? Purchase a lead tester and measure everything in their home?
"The takeaway is to consider the level of concern, but pay more attention to what people are doing and what they'll consider doing," he says.
What are people doing?
In this case, concern about identity theft leads to actions designed to thwart it. Respondents who reported themselves as concerned were more likely to shred documents, 82 percent, than their happy-go-lucky compatriots, 52 percent. Notably, people who are uneasy about identity theft were much more likely to keep tabs on their credit reports. Fifty-three percent of concerned folks do it versus 30 percent of the unconcerned variety.
"Concern drives behavior," says Hoofnagle. "That is a good sign because it shows that people feel as though they have some agency in fighting the crime."
Taken altogether, the results indicate that shredding unnecessary documents containing sensitive information is the most popular privacy protection step that Americans take. Seventy-six percent of Americans shred their papers.
"This is good news/bad news, anytime people take a step to protect themselves. But on the other hand, shredders are so overblown because basically no one wants to go through your trash," says James Van Dyke, president and founder of Javelin Strategy and Research. "They don't need to; they can go in the mail or on a desktop, anything that's not disgusting and is neatly organized."
Women (83 percent) were significantly more likely to destroy sensitive information than men (69 percent).
That difference can be explained by the fact that typically women act as household accountants. "Women tend to be the bill payers of the household and as such, are probably more aware of the need to shred documents since they are the ones managing the documents," says Litan.
One thing people are not doing very much: credit freezes. Only 2 out of 10 Americans (19 percent) have used a freeze to protect their credit.
"Credit freezes are too difficult to effectuate," says Hoofnagle. "In California, there is too much process required for enrollment, but other states are easing the burden both to enroll but also to thaw the file for purchases."
The dark alleys of the Internet
Even though most Americans say they rip up sensitive papers before tossing them, only 7 percent overall worry about a fraudster sifting through their trash to steal their information.
Interestingly, the top two avenues of identity theft that concern most Americans are those over which they have little or no control. The Internet tops the list of ID theft anxiety-instigators, with 45 percent of people fearing online fraud the most, while 25 percent rank leaks from businesses as their primary concern.
Our panel of experts was clearly stunned by the level of fear surrounding the Internet.
Which avenue of identity theft most concerns you?
"Americans will go online but think that e-commerce subjects them to unmanageable identity theft risk," says Hoofnagle. "This is very harmful to e-commerce, and the fear is largely unfounded, because credit card fraud is not only unlikely but also unlikely to cause direct financial harm to the consumer."
The somewhat irrational trepidation concerning the Internet clearly affects consumer behavior. Out of those who answered the survey, 77 percent have Internet access. Of those with Internet, 36 percent say they try to protect themselves from fraud by not shopping on the Internet. Nearly half, 48 percent, avoid online banking.
"A huge number of people are forgoing online banking and e-commerce because of security concerns," says Hoofnagle. "That finding is astonishing and it represents a serious failure of e-commerce companies and banks to create a medium that individuals trust. Banks reasoned that online transactions would promote efficiencies, but the rise of phishing and a sustained reluctance of individuals to enroll are going to threaten the gains brought by this revolutionary medium."
Gartner's Litan believes consumers' mistrust toward online transactions is unfounded.
"Our surveys show the same thing -- that consumers tend to blame security breaches and incidents on the 'Internet' and they are more likely to change their online behavior than their behavior in the physical world as a result," she says. "This reaction is not based on the facts. The fact is that the large security breaches are happening at brick-and-mortar companies like TJX and Hannaford."
"From my experience, ID theft tied to online transactions is less than 5 percent," says Brian Lapidus, chief operating officer at Kroll's Fraud Solutions.
The criminal relation
Though consumers' suspicions toward the Internet might be mostly baseless, perhaps other methods of fraud might warrant more concern. Only 3 percent of those surveyed report that they worry about people they know getting their identifying data.
According to Lapidus, familiar fraud happens far more often than consumer concerns would indicate. "Our experience with clients is that it's closer to 30 percent. That only 3 percent are actually worried about it and the reality is significantly higher is a pretty big discrepancy."
Hoofnagle, on the other hand, disputes the notion that familiar fraud is all that common.
"I am skeptical of the idea that friends and family are the source of most identity theft, as is often claimed," he says. "If friends and family were more likely to steal identities ... then people who know a victim should be much more likely to be concerned about 'a trusted friend or family member' stealing their personal information."
Second to online fraud, Americans ranked business breaches as a primary concern, with 25 percent considering it the avenue of ID theft that most concerns them. Lapidus was surprised the number wasn't higher.
"If you look at what's valuable to businesses today, they use consumer data to hone their marketing message and increase sales, so they store a lot of data," he says. "It's odd that consumers aren't worried about it -- especially in the wake of all of this publicity around businesses that lose data on a daily basis."
Americans prefer to do it themselves
Discovering you've been a victim of identity theft can often be difficult. It's not like the aftermath of a home burglary or a stolen purse, which is immediately apparent. Often the proof won't show up for weeks or even months, and in the case of synthetic identity theft, it might not show up in any discernible way at all.
When asked what they would do if they thought they might be an ID theft target, the majority of survey respondents said they would consider taking various different actions. But relatively few would be moved to hire someone else to take care of the problem.
A whopping 84 percent of respondents to the Bankrate survey said that they would prefer to monitor their own credit reports and accounts as a precaution rather than relying on an outside firm. Only 39 percent said they would sign up with a credit monitoring service.
"Victims feel very vulnerable and want empowerment," says Foley. "They want to be in control, and watching their credit report is part of that. They don't want to give out a Social Security number or account numbers to a third party."
Education is the main answer, she says. "Many people don't know they can check their credit reports for free and the commercials on TV may have impacted this. They see a chance to get a credit report for free only to find that they are now part of a paid service," she says, referring to the misleading advertising of freecreditreport.com, which charges a fee for its service. (Consumers can get a copy of their credit reports for free at annualcreditreport.com.)
Respondents also said they would more likely use a fraud alert over a credit freeze -- 73 percent to 65 percent.
"I'm not that sure they are fully aware of the differences and nuances across the services," says Litan. "But if fraud alerts worked all the time, they would be preferable since you would be alerted of every credit check and could stop it. Hence it's effectively a credit freeze with a little less hassle for the consumer."
Though in general fears compel people to act defensively, more could be done to teach people about how to protect their personal information as well as the negative consequences of identity theft.
"People don't understand the nuances of this crime and therefore make decisions based on commercials which portray identity theft as someone getting a credit card as you," says Foley.
Litan puts the burden on corporations rather than individuals.
"A lot of consumers have concerns about security but most are unwilling to proactively do anything about it," she says. "Frankly, it's a tough world to navigate and much of it is beyond consumer control. In my opinion, it's the service providers, for instance banks and mortgage companies, that need to proactively protect consumers."
This national random-digit-dialed phone study of 1,006 adults 18 or older was conducted for Bankrate by GfK Roper Public Affairs & Media. The surveys were conducted from April 4, 2008 through April 6, 2008. The sample was weighted by demographic factors including age, gender, race, education and census region to ensure reliable and accurate representation of adults in U.S. households. The margin of error for the survey is +/- 3 percentage points. For full results and methodology, download this PDF .
Experts and Speakers
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