Archive for the ‘Industry Data’ Category

By Eduard Goodman


Fly-by-night and unscrupulous identity theft service providers are to be expected in an industry with a lot of growth potential and countless victims. But they’ve always bothered me.

That’s why I was more than happy to participate in the working group that drafted the Consumer Federation of America’s Best Practices for Identity Theft Services. Setting basic standards is a win for the industry and a win for the consumer.

The Best Practices asks companies to clearly explain to consumers why their personal information is needed and how it will be used. It also recommends that they have readily available and transparent privacy policies. The section on privacy is reasonable and easy to understand. It does a good job of laying out basic expectations for providers.

Surprisingly, a number of companies have found that agreeing to follow these guidelines is problematic—mainly because of the privacy requirements. These businesses don’t value transparency of their practices for handling consumers’ personal information.

Now, I realize that the CFA document is not meant for nonprofits or government agencies. It’s intended for private companies who make money by helping people protect against, monitor and recover from identity fraud crimes.

This only drives home what a compelling business argument being pro-privacy makes in our industry. Not agreeing to the Best Practices because you can’t follow the privacy obligations is tantamount to a wind power or solar panel company saying it doesn’t believe in recycling. It’s counter to what the industry is all about. If you can’t be bothered to get your privacy house in order, good riddance.

FTC Chairman Jon Leibowitz said it best in his remarks for the Preliminary FTC Staff issued last December: “Some in industry support what we’re doing, but we know that others will claim we’re going too far. To those highly paid professional naysayers, I have only one question: What are you for? Because it can’t be the status quo on privacy.”

Eduard Goodman, Chief Privacy Officer,

An internationally trained attorney and privacy expert, Eduard has more than a decade of experience in privacy law, fraud and identity management. He is a member of the state bar of Arizona and served as the 2008-2009 section chair of the bar’s Internet, E-Commerce & Technology Law Practice Section.

Our March newsletter highlights the threat of tax-related identity theft, and it’s a timely examination since the federal government says it’s now the .

Tax-related identity theft usually takes one of three forms:

• Armed with a name and SSN, a thief submits stolen information with bogus W-2s to collect a tax refund in the victim’s name. The IRS spotted and stopped 23,000 of these incidents in 2009, the last year for which numbers are available.

• An identity thief uses stolen information to get a job, creating a headache—and financial liability—for the victim when the government wants taxes on income the victim never earned. There were 24,000 such cases reported in 2009.

• Through fake IRS and accounting websites, fraudsters con unsuspecting taxpayers—who think they’re filing returns—into submitting personal information. More than 3,000 of these sites were shut down in 2009 alone.

Think you can’t be a victim? Think again. In 2009, tax-related fraud affected more than 43,000 people, and the IRS Identity Protection Specialized Unit, which tracks and responds to identity theft issues, took 87,000 calls.

The IRS—which is, after all, pretty good at math—recognizes the scope of the problem and has taken steps to remedy it, with some positive results. But there are ways to guard your information and reduce your risk of becoming a victim of tax-related identity theft.

The Identity Theft 911 March newsletter includes firsthand accounts from victims, as well as tips to keep you safe when filing online. Read about this and more at the Identity Theft 911 .

As lawmakers in Washington and the White House haggle over how to shave billions in spending from the budget for the current fiscal year, we have the opportunity to seize on an obvious reform that could save taxpayers a lot of money: getting deadline serious about reducing fraud and bolstering the identity theft defenses of large government agencies and programs like the IRS and Medicare.

As we now know from the latest Federal Trade Commission on consumer complaints, fraud related to government documents and benefits represents the single largest category of identity theft in the United States: In 2010 it accounted for 19 percent of all identity theft, up from 16 percent in 2009.

Fake credit cards used to be the favored vehicle for ripping off innocent consumers, but that type of crime is receding as banks and other card issuers tighten their security measures. In 2008 credit card fraud accounted for one out of every five reports of identity theft, in 2009 the proportion fell to 17 percent, and in 2010 it dropped to 15 percent.

“This shows that the IRS and programs like Medicare could still benefit from more active fraud and identity theft investigation and victim assistance and fewer budget cuts in these areas,” says Eduard Goodman, chief privacy officer for Identity Theft 911.

The federal government essentially is a “processing machine” when it comes to issuing benefits checks and may have little operational incentive to reform its practices from a fraud perspective, said Victor Searcy, Identity Theft 911’s manager of fraud operations.

At Identity Theft 911, we’ve been tracking the growing problem of tax refund fraud, such as when a thief uses a taxpayer’s ill-gotten personal information to create a phony tax return. In one we highlighted in this month’s newsletter, an Illinois retiree had his federal refund ripped off when a con artist simply mailed in a follow-up tax form filled out with only the minimum of information about the taxpayer.

The retiree eventually got his full refund, but that case, and many others like it, shows just how vulnerable a sprawling government agency like the IRS is. Tax- and wage-related fraud leaped from 12.3 percent of all identity thefts in 2008 to 15.5 percent in 2010, according to the FTC. Meanwhile, the fraudulent use of government benefits is also on the rise, going from 1.3 percent to 1.8 percent during the same period.

“This shows that the IRS and programs like Medicare could still benefit from more active fraud and identity theft investigation and victim assistance,” Goodman said.

To protect yourself against tax-related identity theft, follow featured in our monthly newsletter.

Dig deep into the Federal Trade Commission’s new 100-page annual report on consumer complaints, and you’ll find some clues about how identity thieves are fleecing victims of their hard-earned cash.

The outlines 250,854 reports of identity theft. The most common type of identity theft, tax- or wage-related fraud, accounted for 15.5 percent of those complaints.  That’s up from 12.7 percent in 2009.

“There are indications from the report that low-hanging fruit—easy crimes like Dumpster-diving—may be waning as banks impose tighter account security and more people check their accounts online,” said Adam Levin, Identity Theft 911 chairman and co-founder. “The trend is toward more sophisticated kinds of fraud such as tax and employment documents.”

The Sentinel report chronicles a total of 1.3 million complaints made by consumers in 2010, and for the 11th straight year, identity theft led all categories, at 19 percent. The second-most-reported complaint was related to debt collection (11 percent), followed by Internet services and prizes/sweepstakes/lotteries (5 percent).

A new category, “impostor scams,” entered the charts at No. 6, with 4 percent.  This kind of crime happens when a thief pretends to be a loved one asking for money, using a ruse like the old “I’m stuck in Rio for Mardi Gras and need airfare home” routine.

Swindlers targeted the South and states bordering Mexico: The top five states for identity theft were Florida, Arizona, California, Georgia and Texas.

The area of Miami, Fort Lauderdale and Pompano Beach was the hardest-hit metropolitan center in the United States for identity theft, edging out Brownsville and Harlingen, Texas.

If you’re thinking old folks are the easiest marks, think again: For the third straight year, the highest concentration of victims (24 percent) came from the 20- to 29-year-old age group. The oldest group analyzed, age 70 and over, accounted for just 5 percent of the total, consistent with past years.

There are a few dashes of good news in the report: Among them, victims are calling in the cavalry more often. In 2008, only 36 percent of victims notified police; the following year, the figure jumped to 73 percent, and in 2010 it held steady at 72 percent.

“This reflects greater awareness of the right things to do and being more aggressive in addressing identity theft,” said Brian McGinley, Identity Theft 911 senior vice president of data risk management.