The basic equation of identify theft is as follows: the perpetrator obtains some credential or other information that either allows him direct access to some valuable resource (for example, login and password for your online bank account) or information that makes it easier to obtain such access. Identity theft may be as simple as someone stealing your credit card information in order to pile up purchases on your account or as complex as living their life using your legal documents as a cover. In either case, the anonymity of the Internet has fostered an explosion in identity theft around the world.
According to the 2010 Identity Fraud Survey Report conducted by Javelin Strategy & Research, a US firm that provides research to the financial services industry, the number of identity fraud victims in the US jumped in 2009 by 12% from the previous year to 11.1 million adults. This marked the highest increase since the survey was first conducted in 2003, reports Javelin. The total scammed? About US $54 billion.1
The most obvious consequence of identity theft is the loss of money due to theft after credentials are compromised. But other negative consequences take their toll. Some estimate that the time it takes to clean up after identity theft may reach into the hundreds of hours in complex cases. The story of Michelle Brown is illustrative of the potential cost to a victim of identity theft.
Over a year and a half from January 1998 through July 1999, one individual impersonated me to procure over $50,000 in goods and services. Not only did she damage my credit, but she escalated her crimes to a level that I never truly expected: she engaged in drug trafficking. The crime resulted in my erroneous arrest record, a warrant out for my arrest, and eventually, a prison record when she was booked under my name as an inmate in the Chicago Federal Prison
– U.S. Senate Committee Hearing, July 20002
The case of Michelle Brown is admittedly extreme. The vast majority (about three quarters) of all identity theft cases involve credit cards, and credit card companies have adapted to handle the large amount of fraud they now face.