The past two weeks have seen two important announcements come out of the Federal Trade Commission (FTC). First, Commissioner Edith Ramirez was designated to replace outgoing Commissioner Jon Leibowitz as Chairman. Second, identity theft has been reported as the top consumer complaint to the FTC for the 13th year in a row.
Why are these two announcements related? It’s simple. As Chairwoman Ramirez considers how she will lead the FTC throughout her term, it’s worth looking at where the FTC can help Americans the most, particularly in an era of limited budgets. And the most recent data from the FTC overwhelmingly shows that the top priority for the Commission should be on identity theft.
The latest data on identity theft comes from the FTC’s recently released Consumer Sentinel Network Data Book for 2012. The Consumer Sentinel Network (CSN) is a database of consumer complaints received by a variety of sources including the FTC, state law enforcement agencies, state attorneys general, the FBI, the Consumer Financial Protection Bureau, the U.S. Postal Inspection Service, and the Better Business Bureau. While there are limits to how the data should be used (e.g., complaints are not collected from every state, the complaints are not verified, etc.), it still is an extremely useful dataset for gauging consumer concerns in any given year.
The CSN received more than 2 million consumer complaints over the last year and categorized them in one of 30 categories, with identity theft at the top of the list with 18 percent of all complaints. The most common form of identity theft cited in the study was tax or wage-related fraud (49 percent), followed by credit card fraud (14 percent), phone or utility fraud (10 percent), and bank fraud (8 percent). The continued prevalence of identity theft is all the more troubling because it has been shown to take a substantial financial toll on both consumers and the economy as a whole. The Department of Justice reports that in 2010 American consumers suffered a total financial loss of $13.3 billion due to identity theft.
It should be noted that the FTC has taken a number of steps to address this issue including producing a comprehensive survey of identity theft victims through its Using FACTA Remedies staff report. Moreover, the Commission works directly with state and local law enforcement agencies to combat identity theft, provides seminars to train law enforcement officers, and produces guides to help victims. But when identity theft is still the top complaint for consumers for more than a decade and exacts an enormous cost on households, it is worth asking if more can be done.
It’s hard to quantify if the FTC is doing enough since the Commission lumps together all activities around “privacy and identity protection” in its annual budget justifications. But based on many of its public efforts, it does seem that more of the Commission’s resources are going to the “privacy” side (online behavioral advertising, facial recognition, COPPA, etc.) than to “identity protection” efforts.
In fact, for all the rhetoric about consumers demanding more privacy for their online data, there is little evidence of this in the FTC’s own consumer complaint statistics. At best, online privacy is included as number seven on the list (“Internet services”) which accounted for a mere four percent of complaints. This comes after identity theft, debt collection, banks and lenders, shop-at-home and catalog sales, prizes, sweepstakes and lotteries, and imposter scams. Moreover, many of the “Internet services” complaints are about trial offers from ISPs, difficulty in canceling an ISP account and undisclosed charges for online services, so the actual percentage of privacy-related complaints is even lower.
As Commissioner Ramirez begins her new term, I’d encourage her to consider how the FTC can be more effective at making meaningful progress in addressing identity theft, such as through better use of technology. By building on its previous efforts, the FTC can reduce the financial pain and inconveniences incurred by the practice and better address the needs of American consumers.