(CNSNews.com) - A new Federal Trade Commission (FTC) report estimating that 8.3 million Americans are the victims of identity theft reveals a need for more government involvement in protecting credit information, according to a liberal group that advocates for consumers.
The FTC report estimated that 8.3 million Americans, or 3.7 percent of American adults, were the victims of identity theft in 2005. That number is down from a 2003 report, which estimated 9.9 million people were victims of identity theft in the previous year.
Victims of identity theft include people who "experience misuse of their existing credit card accounts ... misuse of non-credit card accounts ... [or who] found that new accounts were opened or other frauds were committed using their personal identifying information."
"It's time to require businesses and government agencies to safeguard sensitive personal data and to give consumers the protection they need," Gail Hillebrand, director of the Financial Privacy Now campaign at the Consumers Union, said in a statement. Hillebrand called for state and federal legislation promoting "security freezes" for credit files.
A security freeze allows consumers to prohibit access to their credit information from the three major credit bureaus. Identity thieves would not be able to open a new fraudulent account because the bank or creditor providing the account would not have access to the credit file associated with the Social Security number.
Consumers can temporarily "unfreeze" access to their credit files with a password or PIN when they are applying for a new credit card, bank account, or loan that requires a credit check.
But Maxine Sweet, vice president of public education for Experian, said file freezing is "one way for certain types of [protections], and it is an extreme way." (Experian is a credit reporting service and information solutions company.)
Sweet told Cybercast News Service that with security freezes "a lot of people ... think it's going to protect them from all kinds of fraud, and the only thing it focuses on, of course, is when a credit report is used." A credit file freeze would not protect against identity fraud involving other records or a stolen credit card, for example.
The FTC report found that 1.8 million people had their information used to open new accounts, or for other fraud not related to credit files, such as giving a stolen ID to a police officer for identification, according to Keith Anderson, an economist at the FTC.
The report found that 3.2 million of the 8.3 million victims were victims of stolen credit cards and no other form of identity theft. Another 3.3 million had an existing account, such as a bank account or telephone account, stolen, but new accounts were not created using their information.
The use of what Anderson called a "fairly broad" definition of identity theft prompts criticism from some analysts who believe the numbers are inflated.
"A lot of identity theft numbers are overstated because they use a very, very broad definition of identity theft," said Jim Harper, director of Information Policy Studies at the libertarian Cato Institute.
"Identity theft is a variety of different frauds and each one needs to be dealt with on its own terms," Harper said, noting that file freeze legislation "would not do a darn thing" about the most prevalent forms of identity theft.
"Criminal law enforcement is most appropriate," he said. "There wasn't even any need for congressional action. Fraud is illegal and has been illegal under state law since the beginning."
Sweet added that while file freezing can be useful for victims of identity theft or for people worried about misuse of their credit report (the service is free for victims and costs $10 for people whose identities have not been stolen), it can also cause hassles.
"A lot of people don't understand all the many uses of a credit report, how many services it helps them get," she said. "So they don't think about it that when they go to buy a cell phone - for example if their cell phone breaks - that they have to have the PIN number and they have to have made preparation for it."
And, she said, Experian and the other credit reporting agencies - Equifax and TransUnion - already offer file freezing services nationwide, so "there isn't any more legislation needed because we've tried to take care of all of the consumers in the same way the law has."
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