Net Fraud, ID Theft Jump

WASHINGTON -- As the Internet becomes one of the most popular tools of modern communication and trade, it's also becoming one of the most fraud-ridden, according to the Federal Trade Commission.

In its 2003 Report on Consumer Fraud and Identity Theft, the FTC finds that 42 percent of 215,000 complaints last year are related to identity theft, an increase of 2 percent since 2002.

The biggest culprits for complaints: Internet auctions, shop-at-home catalog sales, and Internet or computer services.

Online Activity Up

"A total of 55 percent of the fraud complaints were connected to the use of the Internet--up from 47 percent last year," says J. Howard Beales, III, director of the FTC's Bureau of Consumer Protection. The FTC considers fraud to be Internet-related if the consumer made contact via the Internet or conducted a transaction entirely online.

People are also increasingly using the Web to report problems. Beales notes that more than half the complaints the FTC received were from the Web. Also, 28 percent of the complainants are between 18 and 29 years old. That data makes it appear most identity theft and fraud victims are Internet-savvy and young, but that may not be the case, officials say.

"Remember that the data is largely self-reported," Beales says. "Consumers choose to file a complaint with the FTC." Also, younger people may simply be more comfortable doing business online and so more likely both to experience online fraud and to report it.

Reported losses by all fraud victims totaled about $437 million, with the median loss about $228, according to the FTC report. Victims of Internet-related fraud reported losses totaling almost $200 million, with a median loss of $195.

Most victims reported paying nothing as a result of fraud, the FTC notes. However, 15 percent report paying between $101 and $250, and 12 percent say they lost between $251 and $500.

Internet auctions, long cited as a major source of online fraud, also leads complaints in this report with 48 percent. Other leading sources of problems are catalog sales, Internet access services, Internet information and adult services, and foreign money offers.

Legislation Pending

Several members of Congress are pushing for tougher penalties for Internet fraud and identity theft.

The Notification of Risk to Personal Data Act (S. 1350) would require agencies or people that maintain personal data to notify the potential victims if a security breach occurs. The bill was introduced last year by Sen. Dianne Feinstein (D-California) and heard in committee in November.

Also pending is the Identity Theft Victims Assistance Act of 2003 (S. 1581), which amends the Internet False Identification Prevention Act of 2000 (S. 2328) by giving the FTC greater power to target ID theft.

The FTC encourages victims of fraud or identity theft to report incidents immediately. The FTC can be contacted through its Web site or by calling 877/382-4357 (877-FTC-HELP) or 877/438-4338 (877-ID-THEFT).

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