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FTC: Identity theft strikes 1 in 8 adults

Report says thieves cost $53 billion last year

By Jeordan Legon

Report says thieves cost $53 billion last year

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CNN's Julie Vallese reports on ways consumers can monitor their credit information as a check against identity theft. (September 4)
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Identity Theft
Federal Trade Commission (FTC)

(CNN) -- In the most comprehensive look to date at a fast-growing crime, the Federal Trade Commission said Wednesday nearly one in eight U.S. adults fell victim to identity theft in the last five years.

With 9.9 million victims last year alone, the FTC warned the thefts cost businesses $48 billion and $5 billion in out-of-pocket expenses to individuals in 2002.

"These numbers are the real thing," said Howard Beales, director of the FTC's Bureau of Consumer Protection. "For several years we have been seeing anecdotal evidence that identity theft is a significant problem that is on the rise. Now we know. It is affecting millions of consumers and costing billions of dollars."

Based on survey

The findings, based on a survey of 4,057 adults taken this spring, surprised Beales, who said he didn't expect the number of victims to be so high. The most common type of fraud, the report said, was credit card theft, followed by making unauthorized purchases on an existing account, phone or utility fraud and bank fraud. And the survey found 38 percent of victims didn't report the crime.

Among all the grim statistics, there was a shred of hope. Thieves seem to be slowing down after two to three years of the number of ID theft crimes doubling. New cases of identity theft are popping up more slowly and involve less money, which the agency attributed to banks making it more difficult to set up fraudulent accounts and more consumer vigilance.

Citing the report, Bush administration officials urged Congress to approve a national fraud alert system and demand better accuracy from credit reporting agencies. But consumer groups said the Bush-backed Fair Credit Reporting Act would make things worse by superseding tougher state laws against identity thieves.

What needs to be done?

It's going to take more than a few stop gap measures to prevent the widespread economic damage that is possible by identity theft, said Henry Pontell, a University of California in Irvine criminologist. He said computers and the Internet have made it much easier for criminals to strike.

"When you have a problem that is so out of hand, you can't use typical types of responses," he said.

Pontell, who wrote the book "Looting America: Greed, Corruption, Villains and Victims," said the government needs to work with credit reporting agencies, consumer groups, computer whizzes, financial instructions and others to protect the public.

If nothing is done, he warned, the United States could face "a massive clean up of our economy."

"I don't think most people understand it's that out of hand," he said.

The FTC said you can't totally protect yourself from identity theft, but you can lower your risk by monitoring your accounts, checking your credit report regularly and being careful about who sees your personal information.

"Consumers are learning to look for signs of trouble," Beales told reporters. "Education, outreach and media reports are helping consumers wise up."

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