Losses and Suffering
This potentially serious type of larceny can damage a person’s finances, reputation, and credit history, as well as cause great emotional distress that can trig- ger relationship problems. A targeted individual must undertake tasks that are confusing and infuri- ating because the burden of proving innocence falls to the victim.
Identity theft can be viewed as going through a series of stages. People discover they have been preyed upon when they get a call from a credit card fraud division or when a purchase is declined at the point of sale because a card’s limit has been exceeded. Others find out when they are harassed by a bill collector demanding payment on a delin- quent account or when a monthly statement marked “overdue” arrives in the mail. Others notice unauthorized charges on credit card state- ments, peculiar and costly long-distance calls on phone bills, cashed or bounced checks they never wrote, or suspicious withdrawals from their bank accounts. In extreme cases, they discover they
have been targeted when the police take them into custody as a fugitive on an outstanding war- rant, and then it becomes clear that a lawbreaker was released after showing false documents and posting bail. It can take weeks, months, maybe even years before individuals become aware that they have been targeted because the crooks want to get away with the charade for as long as possible. Some don’t discover the extent of the damage until they are denied new credit cards, turned down for student loans, disconnected from utilities, or charged extra high interest rates for mortgages and car loans. Out-of-pocket expenses and time spent on paperwork depend on how long it takes to dis- cover the fraud (Collins and Hoffman, 2004). It takes lower income and less educated people longer to discover the impersonation and consequently they suffer more, in terms of problems with their accounts, harassment by debt collectors, and utility cutoffs (Newman, 2004).
ID theft poses a special problem for military per- sonnel, civilians working for defense contractors, and employees of the criminal justice system who need security clearances. A person who was defrauded might be considered a security risk and could be denied a clearance or might have the privilege of access to classified information revoked if a back- ground check turns up evidence of a maxed out credit card, bounced checks, or an arrest that really was the fault of an impersonator (Velasquez, 2014).
ID scams and swindles exact a serious toll on society as a whole, adding up to billions of dollars in losses annually. New account fraud is more costly but less frequent. Depletion of existing accounts is less common but more expensive to recover from. Businesses sustain most of the financial losses because individuals usually are not held responsible for charges that turn out to be fraudulent. But indi- viduals collectively spend billions in their efforts to repair their credit worthiness. Individuals also suffer indirect costs in the form of businesses’ expenses for fraud prevention and lost revenue that are passed on to them as higher fees; for legal bills to pay for civil litigation initiated by creditors over disputed pur- chases; and for time lost and aggravation they endure while undoing the damage inflicted by the
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impostor (President’s Task Force, 2007, p. 11). Adding business losses to consumer expenses, each incident might cost from $2,800 to $5,100 (Piquero, Cohen, and Piquero, 2011).
Just as the different databases yield inconsistent projections about general prevalence, yearly inci- dence, and twenty-first-century trends, so too are there varying estimates of the actual collective costs of this white-collar crime, and whether overall losses are increasing or decreasing.
Over $13 billion was lost due to identity thefts that took place during 2010, and that figure nearly doubled to $25 billion during 2012, according to the NCVS self-report survey (Harrell and Langton, 2013). However, the impression that losses are being brought under control emerges from the findings of a financial services company’s annual self-report survey that uses a broader definition but a smaller sample. Identity frauds of all kinds cost Americans $48 billion in 2008, rose to $56 billion in 2009, and then plunged to $37 billion in 2010, further tumbled to $21 billion in 2012, and added up to a mere $18 billion in 2013 (Javelin, 2011, 2014).
The next question to be answered is, “In what ways can impersonators hurt their victims?” Unscrupulous impostors can use identifiers to max out existing charge accounts and obtain new credit cards in their target’s name and then run up huge bills that are ignored. ID thieves empty people’s savings accounts and pass bad checks (another type of account takeovers). They secure car loans that will never be repaid based on another person’s credit history and enjoy using gas heat, electricity, cell phones, and landlines while disregarding the costs and consequences of overdue bills. They drive around and get tickets with a license that has their picture but someone else’s name, apply for government benefits and tax refunds they didn’t earn, get hired for jobs by pretending to be an applicant with better credentials, and may even get arrested under an assumed name before jumping bail and disappearing.
One peculiar aspect of identity theft is its para- sitical nature: the offender, unless detected and put out of action, often repeatedly feeds off the same
person in a variety of ways over a prolonged period of time, by maxing out credit cards, emptying bank accounts, and taking out loans that will never be repaid.
Now that the range of possible swindles and scams has been outlined, the question arises, “How did impersonators actually harm their vic- tims?” Table 4.7 shows the relative frequency of each of these forms of fiscal exploitation as the per- centage of all complainants to the FTC’s clearing- house. Credit card fraud was the most common category, afflicting about one-quarter of all victims; loan fraud was the least likely swindle exposed dur- ing 2006. As Table 4.7 reveals, by 2010, credit card fraud, bank account fraud, loan fraud, employment fraud, and cell phone/telephone fraud had dimin- ished, while government benefits fraud (filing a false tax return for a refund) plus assorted other scams had intensified. By 2013, fraud related to govern- ment documents and benefits, especially where thieves collected their victims’ income tax refunds, had grown substantially to become the biggest cat- egory. Other scams, especially credit card fraud, loan fraud, and utilities fraud had declined over the years since 2006, as a comparison of the per- centage of complaints to the FTC in columns 2, 3, and 4 in Table 4.7 reveals.
Findings from the NCVS show a slightly dif- ferent ranking. The 2012 NCVS projected that unauthorized use of an existing credit card was the most widespread problem, more common than draining an existing savings or checking account or using personal information to open a new credit card account or to secure a loan (Baum, 2007). In 2010, the most prevalent type of scam continued to be the unauthorized use or attempted use of a credit card, experienced by 3.8 percent of all respondents, which projected to 4.6 million persons across the country. The second most common type of theft was from a bank’s debit, checking, or savings account. Perhaps as many as 1.8 percent of all households, adding up to as many as 2.2 million people experienced this intrusion in 2010. Between 2005 and 2010, there was a decline in the number of households that suffered because some impostor used fraudulent
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documents, such as to obtain undeserved medical treatment charged to someone else’s health insur- ance policy, or to pretend to be the victim when stopped by the police for a traffic violation or a more serious offense (Langton, 2011).
However, estimates and projections about the actual amount of suffering varied dramatically according to different sources. For example, only 1 percent told NCVS interviewers in 2012 that the impersonation caused significant problems at work or school. And merely 4 percent said they experienced significant relationship problems with their families and friends because of the theft. Only 14 percent of those who discovered that their iden- tity had been appropriated by an impostor experi- enced any out-of-pocket expenses. Of these unfortunate persons, about half lost less than $100. As for aggravation, over half of all victims were able
to resolve any problems in just one hour up to one day. However, nearly 30 percent spent a month or more straightening out the mess in which their good names were used for fraudulent purposes. As for their personal reactions, 10 percent told inter- viewers that the theft caused severe emotional dis- tress, and about 25 percent reported moderate levels of distress. When crooks opened brand new accounts and ran up big bills, their victims experi- enced greater financial, credit, and relationship pro- blems and more intense emotional distress. (Harrell and Langton, 2013).
However, according to a different survey, the average fraud loss per incident cost victims about $630 in out-of-pocket expenses in 2010, a substan- tial increase from the 2009 estimate of about $390 per incident. The amount of time it took consu- mers to undo the damage from an identity theft