What are the different common types of identity theft?

September 9, 2020

Millions of Americans fall victim to identity theft every year. And despite the broad and obvious aphorism, millions of more consumers – which is already an unacceptable amount of fraud cases –will likely experience digital identity fraud events at some point in the near-future with the accelerated shift to digital. And that’s assuming they already haven’t; for example, in an interview with Mitek CTO Stephen Ritter, PYMNTS cites fraudsters are using the pandemic as cover to enact fraud and identity theft totaling nearly $100 million in the U.S. alone. 

Though this data may appear large, it doesn’t capture the full picture of the multi-billion dollar digital fraud industry. Identity theft in the digital world today is vastly different than it was a decade ago. Previously, consumers might be notified they were a victim of identity fraud if a creditor gave them a call asking about a bounced check. But with the uptick in high-profile data center breaches exposing sensitive personal information, synthetic identities that are acting as real people, or that tax identity theft is expected to be a record amount this year given worldwide stimulus payments from governments, consumers are now taking a more active role preventing themselves and their families from becoming the next identity theft victim.   

With consumer habits changing as the world adjusts to the new environment created by COVID-19, it’s necessary for every one to understand how to keep themselves safe from fraudsters. In this article, we’ll take a look at common types of identity theft, how the identity theft takes place, give insights on potential technology solutions, and what businesses should invest in their enterprise foundation during the digital fraud era. Read on for more: 

What are the different common types of identity theft? 

In 2019, the Consumer Sentinel Network, which is part of the Federal Trade Commission (FTC), had over 3.2 million reports of fraud. Identity theft was the top category, with 20.3% of reported cases. People filed more reports related to identity theft, in all its various forms, than any other type of complaint, including imposter scams and telephone and mobile services. 

Identity Theft Facts: The top three most common types of identity theft include: 

  1. Credit card fraud (41.8%) 
  2. Loan or lease fraud (16.1%) 
  3. Phone or utilities fraud (12.8%) 

Interestingly, the age group that was most commonly affected by identity theft are younger audiences. Younger people also report losing money to fraud more often than older people, while older audiences tend to lose a greater amount of money on average. It goes to show that no matter what the age group, anyone is at risk of becoming a victim to identity theft. 

Identify theft type #1: Credit card fraud 

Credit card fraud is at the very top of the list when it comes to identity theft reports in 2019. The FTC received over 271,000 reports from people who said their information was misused on an existing account or used to open a new credit card account. 

The number of new fraudulent accounts that were opened in 2019 was 246,763, which was an increase of 88% from the previous year. On the other hand, the number of fraud reports on existing accounts decreased by 4% to 31,022.  Nonetheless, credit card fraud, by far, exceeds the number of identity-related reports compared to any other type. 

How does credit card identity theft happen? 

There are many ways that credit card fraud can occur. Some instances include: 

  • A fraudster gleaning details from a stolen or misplaced wallet 
  • Credit card information and personal data getting exposed during company data breaches 
  • Scammers sending convincing phishing emails and websites in order to get a person to provide their credit card information 
  • Fraudsters placing card skimmers in public places, such as on gas pumps and standalone ATMs, that record credit cards number and pin 
  • Fraudsters with a skimming device that can record the information on a credit card’s RFID chip if they are within close enough proximity 
  • A pre-approved credit offer being stolen out of a mailbox and used to apply for new, fraudulent credit cards 

Identify theft type #2: Loan or lease fraud 

Loan or lease fraud is generally grouped into six categories: 

  • Mortgage/real estate loan 
  • Apartment or house rentals 
  • Auto loan/lease 
  • Business/personal loan 
  • Federal student loan 
  • Non-federal student loan 

In 2019, there was a significant percentage increase in each type of loan or lease fraud. Mortgage/real estate loans increased 49%, apartment/house rentals increased 56%, auto loans increased 105%, business loans increased 116%, federal student loans increased 188%, and non-federal student loans increased 74%. 

How does loan or lease identity theft occur? 

Loan fraud is when information, facts, and figures are deliberately falsified in order to get a loan or lease. It can happen in both personal and business situations. For example, with mortgage fraud, the Federal Bureau of Investigation defines it as any sort of "material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase, or insure a loan.” 

For example, in Sacramento, Calif., seven people were convicted in a $10 million mortgage scam in early 2019. In order to obtain mortgages, the employees filled out mortgage applications with phony details about the clients’ income, occupation and savings. The company also sometimes used straw buyers -a type of synthetic identity- when the true borrowers’ credit scores were too low, resulting in a $4 million dollar loss for lenders.

Identify theft type #3: Phone or utilities fraud 

In 2019, all types of identity theft related to phone or utilities fraud increased compared to the previous year. This includes the following categories: 

  • Existing accounts of landline telephone (+20%) 
  • New accounts for landline telephone (+40%) 
  • Existing accounts for mobile telephone (+13%) 
  • New accounts for mobile telephone (+32%) 
  • Existing accounts for utilities (+9%) 
  • New accounts for utilities (+34%) 

Scammers know there is a huge demand for phone and utility services. These are services that practically every person requires. It’s easy prey for those looking to take advantage of customers trying to save on their bills. 

How does phone and utilities fraud occur? 

There are two common types of phone and utility scams. The first is a phone call from a fake representative of a phone service or utility company. The second is someone actually going to a person’s door with promotional pricing or a product scam. 

For the phone call approach, fraudsters tend to call and demand payment immediately in an aggressive manner. They might say that a person is behind on payments, and threaten to shut off service access within the next day if payment is not made. 

In the door-to-door approach, they will impersonate legitimate door-to-door sales representatives. A red flag is if they offer much lower rates then what you’re currently paying. The goal for them is to have consumer reveal personal details, such as your credit card number, bank account information, or social security number. 

While those two instances largely affect consumers, today businesses have to deal with their own phone fraud from synthetic identities and deepfakes. Criminals recently used artificial intelligence-based software to impersonate a chief executive’s voice and demand a fraudulent transfer: the employee of an energy firm thought he was speaking on the phone with his boss who asked him to send over €200,000 to a Hungarian supplier. As a result, the funds were transferred and subsequently lost.

How can you help your customers while protecting your business from identity theft? 

While these three identity fraud types in this article have a higher likelihood to occur versus other forms of fraud, there are plenty of ways to defend against them. It comes down to informing your customers about best practices as well as investing in technology that can prevent it, both in the real world and in the digital one. As a as business, here’s some insights and best practices for protecting against identity theft: 

  1. Invest in technologies like Near-Field-Communication (NFC), which allow customers to pay with encrypted and secure methods from a digital wallet that are hard to copy and fake. NFC can also be used to verify the legitimacy of physical documents like passports; the UK government recently announced they would be embedding new passports with NFC technology to increase assurance of the holders at their border. 
  2. Learn more about how recent data breaches has likely exposed most of customers’ personal-identifying-information (PII) and how they can be used to create advanced fraud like “deepfakes” (link
  3. Enable an identity verification check if there’s suspicious charges on a new user account, or set certain charge thresholds to require a person verify their identity for more high-value transactions 
  4. If strictly operating through digital channels, think twice about quickly accepting someone is who they say they are without adequate assurance. Today’s AI can make profiles called “synthetic identities” with pictures that look like real people, but are entirely fake 
  5. Balance the physical and digital worlds, and have users leverage a both real-world identity document and compare the information and images with details from a form and selfie image the user provides. 

Enterprise identity verification is a key to preventing identity theft 

In 2020, consumers are doing more than simply conducting a security freeze or sending a credit report alert to the credit bureau when they’ve found there’s a breach of their personal information. With increases in fake online profiles like synthetic identities, or more adoption of fraud prevention products like child identity theft protection, consumers are demanding more from governments and businesses alike to create security measures that will limit the amount of stolen identities and damage done to their livelihood. One solution companies are adopting? Enterprise identity verification. 

Identity verification is a key factor in helping organizations prevent identity theft of their customers. As consumers fully realize the consequence of recent data breaches with soaring identity fraud cases, companies are implementing identity verification in their onboarding process that both protects their users from sensitive breaches by bad actors getting access to a platform, as well as upping their assurance rates knowing they’ve onboarded more good people and limiting abandonment rates. 

How does digital identity verification work? 

Hundreds of AI-based analytics and face comparison algorithms work together to verify a user is truly the owner of a supplied ID document in order to enable secure customer acquisition, fast money movement and prevent account takeover fraud. 

Document verification and facial biometrics work hand-in-hand to verify identities of users to provide a secure and convenient onboarding process as well as an overall secure platform. Read this blog to see more details on how “Facial recognition technology” works to provide state-of-the-art security. 

Identity theft is one of the fastest-growing crimes and consistently ranks at the top in reported cases to the FTC. Millions of Americans fall victim to it every year. Identity theft can take place at any time, and anyone is susceptible, young or old. The greatest line of defense can be through education and awareness, as well ensuring your business cares about safety, security, and mitigating fraud by any means necessary. 


Sources

  • Consumer Sentinel Network: Data Book 2019: https://www.ftc.gov/system/files/documents/reports/consumer-sentinel-network-data-book-2019/consumer_sentinel_network_data_book_2019.pdf
  • Financial Institution/Mortgage Fraud: https://www.fbi.gov/investigate/white-collar-crime/mortgage-fraud
  • Seven convicted in multimillion-dollar mortgage scam: https://www.mpamag.com/news/seven-convicted-in-multimilliondollar-mortgage-scam-165852.aspx
  • Fraudsters Used AI to Mimic CEO’s Voice in Unusual Cybercrime Case: https://www.wsj.com/articles/fraudsters-use-ai-to-mimic-ceos-voice-in-unusual-cybercrime-case-11567157402
  • Iconic blue passports return next month: https://www.gov.uk/government/news/iconic-blue-passports-return-next-month
  • It’s never too early to protect your child’s identity: https://www.linkedin.com/pulse/its-never-too-early-protect-your-childs-identity-cindy-white/?articleId=6665703532777353216