If your identity is stolen, there's a good chance you know the thief.
One out of seven cases of identity theft last year involved a relative, roommate, co-worker or some other acquaintance, according to an annual survey by California-based Javelin Strategy & Research. While ID theft overall fell 28 percent last year, "friendly fraud" experienced a slight increase, Javelin reports.
With friends like these, you might rightly ask, who needs criminals?
"It's something that people have to be aware of," says Anne Wallace, president of the Identity Theft Assistance Center, a nonprofit organization that helps victims and is supported by the financial services industry. "It's a difficult thing to protect yourself against because you are not expecting it."
So-called friendly or familial fraud can be emotionally devastating, but it is also far more financially damaging than theft by a stranger. The average amount stolen in a friendly fraud case last year was $8,233, compared with $3,666 when the culprit was unknown to the victim, according to Javelin. And the out-of-pocket cost to the victim — including unreimbursed losses, credit monitoring and wages lost while trying to fix the problem — is $1,723 in a friendly fraud case, nearly four times higher than in other cases.
Losses are steeper because thieves who know a victim's financial habits and information are able to go undetected longer, Javelin says. Plus, it's easier for "friendly thieves" to open new accounts when they know personal details about the victim.
New-account fraud, increasingly the method of choice among friendly fraudsters, is harder to uncover than theft from an existing account. If a thief uses your credit card, for instance, you'll usually spot the unusual activity when you get your next statement. But with new-account fraud, you don't get a statement, so the theft can go on for years, says Adam Levin, chairman of Identity Theft 911, an identity management company based in Phoenix.
Javelin found that consumers ages 25 to 34 are most often victims of friendly fraud. Consumers in this age group are more likely to move frequently and have roommates, have a wider circle of friends and are more less likely to keep documents out of sight or take other basic protective steps, says Jim Van Dyke, president of Javelin.
But some theft experts report a more disturbing trend: thieves stealing the identities of the very young. And the perpetrator, they say, is often a mother, father or foster parent.
Jay Foley, co-founder of the Identity Theft Resource Center in San Diego, blames this trend on a change by the IRS in the late 1980s that required parents to obtain a Social Security number for children being claimed on tax returns. The move was meant to reduce tax fraud.
"Now we have a different problem," Foley says, with a parent using children's Social Security numbers and unblemished credit histories to open new accounts.
"We are seeing an increase in the number of children becoming 18 years of age and finding that someone used their information already," Foley says.
Theft experts also say that fraud by friends and family is more widespread than authorities realize.
"The problem with familial fraud is that so many people are averse to talking about it, to actually file a police report or to take some affirmative action against the family member or friend," Levin says.
Victims often absorb the loss instead.
Levin cites three cases in which a friend, a family employee and a member of his own extended family had their identities stolen by a relative. None of the victims went to the police, Levin says. They ended up repaying the debt incurred by the thieves, and one victim filed for bankruptcy, he says.
Of course, it's natural to trust friends and family. But with friendly fraud a reality, it's worth taking precautions to keep your information secure. That way, if it turns out an untrustworthy person is in your circle of friends and family, you're less likely to get burned.
How to reduce the risk of friendly fraud
•Don't divulge passwords to friends and family.
•Keep bank and other financial statements in a secure location and out of the view of roommates or visitors. Shred sensitive documents before throwing them away.
•Bank online so you can check your account frequently for unusual activity. Review monthly paper statements for strange charges. Set up email and text alerts from your bank to notify you when large transactions occur.
•Check credit reports at least annually.
•Put a security freeze on your credit report, which prevents potential creditors from viewing your report. This should stop anyone — including you — from opening new lines of credit. You generally must pay a small fee — up to $5 for Marylanders — to place the freeze or lift it, even temporarily. Visit the websites of TransUnion, Equifax and Experian for details on freezing your report with each.