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FTC Focuses on Synthetic Identities as New Account Fraud Continues to Rise

According to recent data and studies, identity fraud and new account fraud continue to plague both banks and consumers, with 80 percent of fraudulently opened credit card accounts in the U.S. applied for with synthetic identities and new account fraud on payment cards increasing by 11 percent in the UK over the last year.

New account fraud refers to fraudsters taking stolen identity information to open up a credit card or line of credit in a victim’s name. In cases of full identity theft the fraudster will provide all the information of one victim, but in other cases a fraudster might combine a social security number with a different name and address to create a synthetic identity. According to the Federal Trade Commission, 80 percent of new account fraud on credit cards is committed with synthetic identities.

New account fraud is an issue worldwide. According to Financial Fraud Action UK, a consortium of banks, issuers and acquirers fighting the collective issue of payment fraud, new account application fraud grew to £15.6 million last year, an increase of 11 percent from 2015.

New account fraud and opening credit card accounts in victims’ names is damaging to both the issuer and consumer. The fraudster’s goal is to maximize the value of the fraudulently obtained payment card and will typically reach the credit limit. It often isn’t until several months of no payment does the issuer realize it may be fraud. Often the victimized consumer doesn’t find out until the lack of payment or default dings their credit score. Although that can take a long time to be seen as well. A recent consumer survey from Experian found that 48 percent of U.S. adults do not check their credit reports for errors or suspicious activity regularly.

This same survey from Experian showed that consumers don’t seem too worried about new account fraud or lines of credit being taken out in their name. More than half of consumers, 53 percent, said they don’t worry about identity theft because banks and credit card companies monitor their accounts. These consumers aren’t accounting for the accounts they didn’t create, or the availability of personal information that can be used to create such fake and synthetic accounts. More than one-quarter of U.S. consumers are not concerned about their personal information being available on the dark web, and 52 percent say it is not very likely that they will ever fall victim to ID theft.

Considering the wide availability of personally identifiable information, including social security numbers and other data needed to apply for a credit card or loan, and the growing use of synthetic identities to commit new account fraud, it is much more likely a consumer will succumb to identity fraud than they believe. While attention tends to focus on major data breaches and how data is stolen electronically, according to the FTC, 53 percent of identity theft is committed by stealing physical copies or records of data, such as with mail theft.

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