Identity theft and businesses
Identity theft involves the unauthorized use of someone else's personal information for fraudulent purposes, such as credit card fraud. This issue has historical roots, with early instances dating back to the 19th century. In recent decades, identity theft has escalated, impacting both individuals and businesses significantly. The Federal Trade Commission (FTC) has documented a dramatic increase in reported cases, with millions of Americans affected each year. Major retailers have faced substantial breaches, leading to the compromise of millions of credit and debit card accounts, which highlights the vulnerability of businesses to such crimes.
The financial repercussions of identity theft are considerable, with victims incurring costs often exceeding $1,000. Beyond monetary losses, victims may experience long-lasting issues, including legal complications and difficulties in securing future credit. Businesses also suffer from lost productivity, legal challenges, and a decline in consumer trust. Government agencies are actively engaged in combating identity theft through various task forces and proposed legislation, although not all initiatives have passed. This growing problem underscores the importance of preventive measures for both consumers and businesses to mitigate risks associated with identity theft.
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Subject Terms
Identity theft and businesses
Definition Illegal appropriation and use of personal identifying data belonging to other people in order to impersonate them, usually to conduct business transactions in their name
The criminal act of identity theft costs Americans and American businesses millions of dollars per year in losses, legal fees, and investigations and fosters distrust between consumers and businesses.
Identity theft is the act of one individual stealing another’s personal information for the purposes of posing as that person. The most common method of identity theft is credit card fraud, but there are many other variations. There is no official record of the first reported case of identity theft, but incidents can be identified throughout history. In 1863, for example, New York City fell into rioting because of the Union draft. Wealthier citizens who were drafted paid lower-class men to take their identities and report to the Union recruiting centers. The common price was $300 for individuals willing to assume a fraudulent identity for the purpose of being drafted. During those earlier times, victims of identity theft were simply inconvenienced by the need to replace their identification, but as the years progressed, the crimes expanded and the victims multiplied with every offense.
In 1998, the Federal Trade Commission (FTC) was directed to create a repository of all data related to identity crimes. The repository would include the number of victims, cost to the victims, cost to the businesses involved, and length of time to remedy the problem. Within the first year, more than one thousand crimes were reported, with that number increasing to thirty-one thousand the next year. Each subsequent year, the number of reported crimes doubled from the previous year. By 2004, the number of reported crimes a year climbed to 650,000. Almost ten years later, identity theft still topped the list of consumer complaints for 2013 released by the FTC in 2014, accounting for 14 percent of the more than two million complaints reported. The list of offenses had grown from just credit card fraud to include theft of telephone calls, bank accounts, government benefits, and loans, as well as employment-related fraud. Victims were reported from all age groups, including minors. Another survey performed by the FTC in 2006 through telephone interviews found that more than eight million Americans living at the time had been the victims of some form of identity theft, while a report released from the Bureau of Justice Statistics showed that over thirty million Americans had experienced identity theft of some kind in 2012.
The continued risk of identity theft and its impact upon large businesses and their consumers was evident in late 2013 when a data breach occurred that affected the retailer Target during the busy holiday season; forty million debit and credit card accounts were stolen. The following year, yet another major retailer announced that it had suffered a large-scale security infiltration. Home Depot reported that fifty-six million credit and debit cards were likely compromised and fifty-three million emails were lost in the data breach concerning payment terminals. The company later cited issues with the security of the Microsoft software being used in stores.
Costs
There are many costs resulting from identity theft; the greatest weighs on the consumer. The 2006 FTC survey reported that over 50 percent of all identity theft crimes from the previous year resulted in gains to the thieves of $1,000 or more. One-quarter of these crimes cost the victims at least $1,000 from their own pockets. In total, from 2001 to 2004, the FTC reported that victims paid out almost $4 billion. In 2013 the Bureau of Justice Statistics reported that Americans unwillingly gave the majority of the $24.7 billion lost to identity theft in 2012 to the thieves themselves. These victims also learned that money was not the only thing they lost as a result of these crimes. Some 29 percent of the people who had personal information stolen spent at least one month trying to resolve the issues.
On the surface, once money has been repaid and the issue has been handled, everything can slowly go back to normal, but victims quite often continue to have various problems that plague them after the crime has been committed. The paramount complaint is from creditors, because after an identity theft, the victim becomes a greater risk for future attacks. Collection agencies can start to call for charges that the victim never made, banks can refuse to service victims through new loans or opening new accounts. The legal ramifications could be the worst problem of all. Law-enforcement agencies continue to investigate the incident and watch the victim in case they are struck again. The problems that arise after the crime has been resolved may persist for years and, in worst-case scenarios, until the end of the victims’ lives.
American businesses as a whole have also suffered greatly. Lost manpower hours hurt any organization, but to a small business, losing an employee for any amount of time can be very difficult to work around. Businesses can also lose money for the same reasons that individuals do, if they are tied up in legal troubles, as well as developing an inability to trust their client base. Insurance companies spend millions of dollars a year on cases in which their clients have been victimized. The government also spends billions of dollars a year maintaining multiple task forces and organizations that assist in combating identity theft.
Law-Enforcement Efforts
The FTC gathers information on identity thefts. The Department of Justice, Central Intelligence Agency (CIA), Federal Bureau of Investigation (FBI), and Secret Service all get involved in tracking down criminals who commit identity theft. Several of these organizations travel the world, tracking down identity thieves and perpetrators of fraud against American citizens. The President’s Task Force on Identity Theft, formed May 2006, is a cooperative organization that aids the other government agencies by sharing information between them all. The task force was designed to aid the law-enforcement community to track down and prosecute identity theft criminals. It also provides education services to governmental agencies and corporate businesses on how they can help individuals protect themselves against identity predators. As identity theft increases, the need for government response grows, as does the burden on taxpayers. Identity theft affects all citizens, whether they have been victims or not.
Lawmakers have also made attempts to pass official legislation to fight against identity theft. However, both the Personal Data Protection and Breach Accountability Act of 2011 (which would have held companies responsible for any failure to prevent security breaches) and the Stop Identity Theft Act of 2012 did not pass through Congress. At the state level, the National Conference of State Legislatures reported that thirty-seven states introduced legislation concerning identity theft in 2013 alone.
Bibliography
Abagnale, Frank W. Stealing Your Life: The Ultimate Identity Theft Prevention Plan. New York: Broadway, 2007. Print.
Collins, Judith M. Investigating Identity Theft: A Guide for Businesses, Law Enforcement, and Victims. Hoboken: Wiley, 2006. Print.
Cullen, Terri. The “Wall Street Journal” Complete Identity Theft Guidebook: How to Protect Yourself from the Most Pervasive Crime in America. New York: Three Rivers, 2007. Print.
"FTC Announces Top National Consumer Complaints for 2013." Federal Trade Commission. FTC, 27 Feb. 2014. Web. 10 Mar. 2015.
Hammond, Robert J. Identity Theft: How to Protect Your Most Valuable Asset. Franklin Lakes: Career, 2003. Print.
Harrell, Erika, and Lynn Langton. Victims of Identity Theft, 2012. Bureau of Justice Statistics. Bureau of Justice Statistics, 12 Dec. 2013. Web. 10 Mar. 2015.
Hayward, Claudia L., ed. Identity Theft. New York: Novinka, 2004. Print.
"Identity Theft State Legislation 2013." National Conference of State Legislatures. Natl. Conference of State Legislatures, 19 Feb. 2014. Web. 11 Mar. 2015.
Sullivan, Bob. Your Evil Twin: Behind the Identity Theft Epidemic. New York: Wiley, 2004. Print.