Data Breaches are not The Cause of Identity Fraud

By | September 12, 2006

Incorrect beliefs about the way consumer data breaches have an impact on identity fraud may lead to ineffective actions taken by consumers, according to a recent report published by Javelin Strategy & Research. The misunderstandings may also lead to flawed protective measures taken by corporations as well as state and local governments.

The report, Data Breaches and Identity Fraud: Misunderstanding Could Fail Consumers and Burden Businesses, is the first-ever representative report that shows the true known relationship between data breaches and actual occurrences of identity fraud.

According to the report, public notifications of breaches reached into the tens of millions last year, but identity fraud only increased four percent. The large number of data breaches and the publicity they have received has created the incorrect assumption that fraud resulting from data breaches is prevalent. The Javelin report indicates that the known leading causes of ID fraud are lost or stolen wallets, checkbooks and credit cards, which account for 30 percent of ID fraud. Other known leading causes include information stolen by friends, acquaintances, relatives or corrupt employees.

Key findings of the Javelin report: 30% of consumers were victims of a data breach during the 12-month study; Less than 1% of those whose data was lost were actually victims of identity fraud; Data breaches were responsible for only 6% of all known cases of identity fraud in both new and existing accounts; National legislation could saddle businesses with costly and unnecessary burdens and distract consumers with advice that will do nothing to protect them from identity fraud; National legislation is needed to set uniform national standards for consumer notice of data breaches; Legislation must be based on a complete understanding of the threats and not on overreactions to the issue.

“When you compare the public attention that data breaches receive to other causes of ID theft, consumers are being misdirected on how to set overall priorities for guarding against identity fraud,” said James Van Dyke, President of Javelin Strategy& Research. “It is clear that there are other areas of exposure that carry a far greater overall risk. Consumers should be empowered with awareness of all the causes so they can take appropriate steps to prevent ID fraud.”

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