Identity theft is an increasingly common scam in which criminals obtain an individual's personal information to execute financial fraud or other crimes. Scammers may acquire this information by illegally intercepting mail, carefully watching others in public as they enter credit card or PIN numbers, or via unsolicited phishing emails, text messages, or phone calls. They often use this information to create false applications for credit cards and loans.
The U.S. Federal Trade Commission (FTC) tracks all identity theft and fraud reports through its Consumer Sentinel Network. For the most part, reports of identity theft have increased on a quarter-by-quarter basis since consumers reported 112,642 instances in Q1 2017. This figure peaked at 553,889 reports in Q1 2021. In total, the FTC received more than 2.8 million fraud reports, about half of which involved identity theft, in 2021.
Fraud Losses Exceed $5.8 Billion
Combined, the 2.8 million consumers who reported instances of fraud to the FTC in 2021, lost $5.8 billion. This marks an increase of more than 70 percent from 2020. Imposter and online shopping scams ranked first and second, respectively, in terms of reporting frequency. Consumers reported $2.3 billion in combined losses from imposter scams in 2021, up from $1.2 billion the year prior.
Like identity theft, imposter scams involve fraudsters using deception to steal an individual's money or personal information. Government imposter scams were the most common during Q1 2021 as fraudsters sought to take advantage of COVID-19 relief benefits. Other commonly reported imposter scams included tech support scams and romance scams.
Identity Theft Reports By State
In addition to filing identity theft and fraud reports across a variety of categories, the FTC tracks reports of fraud by individual states on its data analysis website (ftc.gov/exploredata). Rhode Island citizens were the most susceptible to identity theft in 2021 with 2,857 reports per 100K population. Kansas ranked second at 1,355, while Illinois (924), Louisiana (732), and Georgia (618) rounded out the top five.
More than 395,000 people reported instances of government documents or benefits fraud in 2021, making it the most common type of identity theft last year. Other types of theft reported included credit card fraud (389,737), loan or lease fraud (197,914), bank fraud (124,388), employment or tax-related fraud (111,723), and phone or utilities fraud (88,813).
COVID-19 Government Benefits Fraud
Identity theft has been increasing steadily in recent years, but its rapid rise in 2021 can be largely attributed to COVID-19 and government-issued benefits for those affected by the pandemic. President Donald Trump, in signing the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, granted states authority to extend unemployment insurance availability to those who weren't able to work due to COVID-19.
Recognizing a sharp uptick in identity theft reports via fraudulent unemployment claims, the Attorney General created the COVID-19 Fraud Enforcement Task Force in May 2021 to investigate these claims and prosecute the responsible culprits. Among other notable rulings, two Tampa, Florida residents were sentenced in December 2021 to several years in prison for illegally acquiring $87,046 in fraudulent insurance benefits.
Scammers have also taken advantage of the pandemic to find new and innovative ways to deceive their targets. Some have created fake phishing websites that promise free COVID-19 rapid tests, while others have claimed to be representatives of vaccine manufacturers offering free rewards for recipients who complete a survey and share their banking information. Scammers have also impersonated Federal Emergency Management Agency (FEMA) and Internal Revenue Service (IRS) officials. Some have even carried out robocall campaigns to promote phony remedies and fake tests.
Digital Payment Platform Fraud
The COVID-19 pandemic changed several aspects of society and accelerated widespread use of digital peer-to-peer payment platforms like Zelle and Apple Pay. With physical stores shut down for several months in many parts of the US, people increasingly took to online shopping. Once stores reopened, consumers were more likely (or encouraged) to use these payment platforms to make everyday purchases.
The most common digital wallet scam is one in which the scammer sends a message to an individual, claiming to have accidentally sent money intended for someone else. The individual will typically notice the money is in their account, but what they do not know is that it was sent using stolen credit card details.
Once the money is returned, the scammer will remove the stolen credit card information from their digital wallet and link their actual bank account. Upon notice of a stolen credit card, the affiliated bank will not only block the account number but also reverse the charges and return the funds from the person who has been scammed to the person who had their credit card information stolen.
"Identity fraud has evolved and now reflects the lengths criminals will take to directly target consumers in order to steal their personally identifiable information," notes Javelin Strategy & Research lead fraud security analyst John Buzzard, speaking to CNBC.
Javelin found that roughly 18 million Americans were victims of these payment platform scams in 2021.