Understanding Identity Theft
What is identity theft? Let's start by clearing up a common misunderstanding about the term Perhaps a better way to describe the crime might be "identity cloning." When your identity is taken, you don't actually lose it; it's actually replicated and used by another person. This in part explains why identity theft is such a difficult crime to fight.
If someone were to steal your car, for example, you'll know it's gone because you no longer have possession of it. But if someone were to steal your identity, it may be months before you even suspect something's wrong. To refer back to our example, you really have no way of knowing when and if you've been "cloned."
Identity Theft Is A Costly Crime
The financial impact of identity theft is staggering. According to a Federal Trade Commission study, the national cost of identity theft is estimated at more than $53 billion annually. Most of that cost is borne by the financial industry, mainly in fraudulent losses that have to be written off. The individual loss per victim can range from $4,000 to more than $20,000. And that's only the financial loss per crime.
The Identity Theft Resource Center (a non-profit located in San Diego, CA) estimates that victims now spend an average of 600 hours recovering from identity theft, with legal fees and time off from work, tallied over a period of years. And based on 600 hours times the average victim's wages, this equals nearly $16,000 in lost potential or realized income. Victims are also known to average about $1,400 in out-of-pocket expenses.
According to the Center, "Even after the thief stops using the information, victims struggle with the impact of identity theft. That might include increased insurance or credit card fees, inability to find a job, higher interest rates and battling collection agencies and issuers who refuse to clear records despite substantiating evidence of the crime. This 'tail' may continue for more than 10 years after the crime was first discovered.
The emotional impact on victims is likened to that felt by victims of more violent crime, including violent assault and repeated battering. Some victims of identity theft report feeling dirty, defiled, ashamed and embarrassed, and undeserving of assistance. Others report a split with a significant other or spouse and of being unsupported by family members."
Identity theft statistics suggest the business community also loses between $40,000 and $92,000 per name in fraudulent charges as a result of identity theft, and either have to write this off as a loss to their business or pass it on to the customer. And to make matters worse, the average arrest rate is under 5% of all reported cases by victims, according to law enforcement.
So What Will Thieves Do With Your Identity?
Identity theft is fundamentally about stealing enough information about you, the victim, to create a clone convincing enough to trick an organization into providing the thief a service, a product, or a loan in your name.
The stolen information will then either be used by the thief to obtain money in your name, or, particularly in cases of Internet identity theft, will be traded with other thieves, often on sophisticated online networks at the other side of the globe.
According to victims of identity theft, this is just a selection of the things thieves will do with stolen identities:
- open new credit account(s)
- make charges on an existing credit card account(s)
- open new cellular phone service
- open a new cable TV or energy utility account
- establish new home telephone service
- take over or add service to an existing cell phone account
- take over or add service to an existing energy account
- subscribe to an Internet service
- make charges over the Internet for goods or services
- access existing online banking accounts
- take over existing checking accounts by check theft or check-washing
- open a new checking or savings account
- create checks using a name and address, with false account info
- obtain a student loan
- obtain an auto loan
- file for bankruptcy
- obtain a mortgage
- obtain a personal loan
- obtain a business loan
- commit a non-financial crime and give the victim's information to the arresting officer
- get a driver's license
- create or buy a counterfeit driver's license
- write bad checks or commit other financial frauds that result in warrants issued in the victim's name
Time parameters on Identity Theft — a tough call to make
To make things harder for victims and investigators, identity theft is usually a delayed-action crime, meaning that it can be months between the time the victim's information is stolen and then used to commit a crime.
As a result, that makes it much harder for victims to retrace their steps in an effort to identify the source or culprit. It also makes it very difficult and time-consuming for investigators to investigate. By that time, there's usually very little evidence left that may be admissible in court. That would explain why less than 5% of all identity theft cases are ever prosecuted.
All this amounts to a very personal crime that frustrates everyone involved, from victims to law enforcement. Everyone, that is, except the culprit.