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Credit Card Applications » News » Legal » Data Breaches Lead to Identity Theft and Cost Billions

Data Breaches Lead to Identity Theft and Cost Billions

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Data Breaches Lead to Identity Theft and Cost Billions
June
13

Last year there were 1,611 data breaches—a 48% percent increase over 2011, according to the Open Security Foundation. The data is increasingly being used by criminals to commit identity fraud. A report from Javelin Strategy and Research estimates that 51% of all fraud victims had their personal information leaked in a data breach.

In 2010, people receiving a data breach notification from their bank, credit card issuer or other institution had a one-in-nine chance of becoming a victim of fraud. Jump ahead two years to 2012, and one in four people receiving that same notification became fraud victims.

Javelin says that a single breach can mean the loss of billions of dollars, and cites one massive incident in South Carolina that cost an average of $776 per customer impacted and $5.2 billion for merchants and financial institutions involved.

In that instance the South Carolina Department of Revenue was hacked by people looking for Social Security numbers. They got them—3.6 million of them. It was one of the most costly breaches in history.

Steps to take

This infographic illustrates how data breaches can lead to fraud, and what steps consumers can take to protect themselves. These include enrolling in free identity protection services when they are offered and signing up for account alerts so consumers are notified of possible fraudulent activity. The report showed that only 20% of data breach victims signed up for free identity protection.

Financial institutions are encouraged to stop using Social Security numbers as an account authentication method. They are used as a means of identity verification by an estimated 80% of the 25 biggest financial institutions in the country, according to Javelin. Companies that keep consumer data should encrypt sensitive information, conduct regular system audits and establish checklists for security migration.

The damage done

Thieves use debit and credit card numbers to buy things and drain accounts. Social Security numbers can be used to open new accounts and take over existing ones. When an account is hijacked, it costs an average of $5,100. A stolen debit or credit card means an average loss of $1,600.

If their credit card or debit card information is stolen, people can simply close the account, but a stolen Social Security number is far more difficult to contain. If this happens, consumers must stay on their guard for years to come, say the report’s authors.

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