Gartner Says Banks and Financial Services Providers Must Take More Aggressive Steps to Combat Identity Theft
STAMFORD, CONN., September 17, 2003 — Businesses, consumers and the U.S. government are becoming more aware of the prevalence of identity theft, however it is the banks and other financial services providers that must take more aggressive actions to fight these crimes, according to Gartner, Inc. (NYSE: IT and ITB).
The U.S. Federal Trade Commission (FTC) recommends educating consumers to be more careful in disseminating credit information. It said bank regulators should establish "red flags" that creditors should heed when granting credit, and establish stronger criminal penalties and prosecution.
While these actions may be useful, Gartner analysts said it doesn't go far enough. Gartner analysts advocate a more forceful approach that focuses on the source of illegal credit - credit card issuers, cell phone service providers, banks, and retailers and businesses that extend credit.
"Many financial and wireless services providers will provide instant credit approvals when applicants answer a few personal questions," said Avivah Litan, vice president and research director for Gartner. "Instead, they should conduct checks for identity theft before issuing loans or other forms of credit."
Some of the problems have also occurred because most of the crimes are not classified as identity thefts. This has resulted in earlier perceptions that identity theft was not as large of a problem.
"Banks and financial services providers should consider reclassifying all loans in which a payment date is missed as identity theft, rather than writing off a billable item as a loss if the bill isn't paid for 180 days," Litan said. "Such action will likely raise creditors' appreciation of identity theft fraud, while reducing their loan and credit losses. It will also likely motivate creditors to attack identity theft fraud with effective solutions, and it will ensure that innocent consumer victims remain innocent until proven guilty. Now, it's the other way around."
A recent Gartner survey showed that seven million U.S. adults, or 3.4 percent of U.S. consumers, were victims of identity theft during the 12 months ending in June 2003. A subsequent FTC study released September 4 confirmed Gartner's findings. Until then, the government was reporting less than 700,000 documented identity theft crimes. Because this crime is often misclassified, the thieves have better than a one in 700 chance of being caught by the federal authorities.
"While our recommendations will likely ease the pain and ramifications of identity theft by making it harder for thieves to get credit, we also realize it won't prevent thieves from stealing identity information for other ends," Litan said.
Gartner analysts will provide additional analysis on security issues at Gartner Symposium/ITxpo 2003, to be held October 19-24 in Orlando, Florida. Gartner Symposium/ITxpo is the IT industry's largest and most strategic conference, providing business leaders with a look at the future of IT. For more details or to register for Gartner Symposium/ITxpo 2003, visit www.gartner.com/us/symposium/us or call 1-800-778-1997. Members of the media can register for the event by contacting Maria DiMasi at 212-699-2734 or e-mailing GartnerEvents@middleberg.com.
Additional information is available in the Gartner report Underreporting of Identity Theft Rewards the Thieves. This report examines the rising trend of identity theft and what consumer and legislators must do to convince banks and other financials services providers to step up prevention efforts that make it harder for thieves to operate. This report can be purchased on Gartner's Web site.
Further in-depth analysis on security is available to subscribers of the Gartner IT Security Directors Membership Program. This powerful tool is designed to help those charged with ensuring optimal security for their business and IT infrastructures achieve their goals, and also help them to manage costs. The Gartner IT Security Directors Membership Program provides market analysis, decision support tools, on-site workshops, newsletters, bulletins, and access to analysts via a Web portal designed specifically to address the growing issues and concerns of IT security directors. For more information on Gartner's IT Security Directors Membership Program, visit www.gartner.com/pages/story.php.id.3436.s.8.jsp or call Gartner at 203/316-1233.
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