ID Theft Drops as Check Fraud Continues

Identity theft loss rates fell recently and check fraud continues to be a problem despite the declining number of checks in the payment system, a panel told an audience at the Federal Reserve Bank of Chicago’s 2008 Payments Conference last week.

Despite the press attention given to identity theft, total losses due to the crime have dropped 12 percent in the last year to $45 billion, said Bruce Cundiff, director of payments research, Javelin Strategy and Research. And half of the consumers who are the victims of identity fraud suffer no financial impact. A prime reason is that card issuers, for example, typically absorb the cost of fraudulent charges. However, the typical consumer spends a significant amount of time – 25 hours – to resolve card fraud.

The time element is one that distresses many consumers, according to Cundiff. Though card companies and others in the payment system have fraud departments, consumer self-detection actually leads to faster detection of fraud, according to Cundiff.

Meanwhile, crooks continue to commit fraud using old-fashioned paper checks.

The number of checks has dropped sharply with the turn to online payments and card payments, but the total value of check payments has grown, indicating that checks remain the preferred payment vehicle for larger payments, said David Walker, president and CEO of the Electronic Check Clearing House Organization (ECCHO).

But the evolution of checks hasn’t done much to change the process of fraud in the sector, he said.

“The same parties continue to participate at the same process points. If a fraudulent signature is placed on a check or if the amount is changed, it will appear on the image as deposited with the bank,” said Walker. “If a kite is initiated via paper checks and those checks are imaged, the kiting continues.”