Identity Theft Ranks as Top Consumer Complaint in 2008

By Dawn Handschuh, Personal Finance Writer Archive

Identity theft topped all consumer complaints reported to the Federal Trade Commission (FTC) for the ninth year in a row. 

The FTC reported 1.2 million consumer complaints in 2008, an approximate 50% increase over the previous year. Of these complaints, 26% were identity theft complaints. The FTC includes in its reporting consumer complaints tracked by 125 other organizations, such as the Better Business Bureau, Internet Crime Complaint Center and U.S. Postal Inspection Service.

The FTC data, released February 26, 2009, is based on actual, though undocumented, complaints, not a survey. The five states reporting the highest rates of identity theft were Arizona, California, Florida, Texas and Nevada.

Why these five states suffer such high rates of identity theft is open to interpretation. Some observers note that three of the top five states are border states dealing with significant illegal immigration issues, and all five are battling high rates of foreclosure, suggesting that both illegal immigration and the economic slump have exacerbated the incidence of identity theft.

Here's a national breakdown of the frequency of different types of identity theft complaints:

Credit card fraud: 20%
Of these, 12.3% involved new accounts, and 8% involved existing accounts.

Government documents/benefits fraud: 15%
Fraudulent tax return-related identity theft, at 12.2%, has increased more than 50%. Other complaints involved other forged government documents (1.3%), government benefits (1.2%) and driver's licenses (0.9%).

Employment fraud: 15%
While the national rate of employment fraud was 15%, in the two states ranked highest in the nation for identity theft complaints, Arizona and California, employment-related fraud accounted for the highest number of complaints (33% and 20%, respectively). (The next most common type of identity theft in those two states was credit card fraud, at 14% and 20%, respectively.)

Phone or utilities fraud: 13%
The bulk of complaints involved new utility (5.5%), wireless (4.1%) or telephone (3.4%) accounts.

Bank fraud: 11%
This included electronic fund transfers (4.6%), existing accounts (3.4%) and new accounts (3%).

Loan fraud: 4%
This included business, personal and student loans (1.8%), car loans and leases (1.3%) and real estate loans (1.2%).

Of those reporting identity theft, 65% failed to contact the police department or file a police report, indicating that educating the public about how to respond to suspected identity theft is of paramount importance.

The five states with the lowest amount of reported identity theft were Wyoming, Montana, Iowa, North Dakota and South Dakota.

Making up 26% of total consumer complaints, identity theft far exceeded the reporting of other types of consumer complaints. The next most frequently reported complaints were:

Third-party and creditor debt collection — 9%
Shop-at-home and catalog sales — 4%
Internet services — 4%
Foreign money offers and counterfeit check scams — 3%
Credit bureaus, information furnishers and report users — 3%
Prizes sweepstakes and lotteries — 3%
TV and electronic media — 2%
Banks and lenders — 2%
Telecom equipment and mobile services — 2%
Computer equipment and software — 2%
Business opportunities, employment agencies and work at home plans — 2%