Data Industry: Stop Blaming My Family and Friends for Identity Theft

Our friends in the financial services industry desperately want you to believe that identity theft isn’t their fault. And they’ve engaged in a type of statistical trick to convince reporters and lawmakers that it is family and friends who are responsible for the crime. You see, if identity theft is committed by your family and friends, it’s your fault, and the public policy response should be more consumer education. If it’s not–if strangers are committing the crime–then there needs to be other public policy interventions.

This is the trick: the Federal Trade Commission releases a report on identity theft. It says that in the situations where a victim knows who the thief is, 35% of the time it is a relative, and 18% said it was a friend. Add 35% and 18% together, and you can say that most identity theft is committed by family and friends.

But interpreting the numbers that way is a bit dishonest. That’s because in most cases, the identity of the thief is unknown. Here’s what the statistics look like from the FTC:

ID Theft Perps

You see, the people interpreting the data this way are assuming that the unknown cases are exchangeable with the known ones. That is, they are projecting the data from the minority of known identity theft cases to make conclusions about the majority of cases. This type of extrapolation isn’t very honest, and it’s about time that academics stop perpetuating it.

It’s unlikely that the known cases are exchangeable with the unknown ones. Obviously, a victim is more likely to know who the thief is in cases where a family member is involved, and much less likely to know the thief when a stranger is involved.

If you don’t believe me, read the actual FTC report. It doesn’t say that a majority of cases are committed by family and friends. It says that “35% of the 26% of victims who knew the identity (or, in other words, 9% of all victims) said a family member or relative was the person responsible…” and “…18% said the thief was a friend, neighbor, or in-home employee…5%…of all victims…

Here is the full, 90+ page FTC Synovate report (PDF). Here is an excerpt (PDF) that focuses only on the identity of the perpetrator.

Some are citing to a study by Javelin Research to make the same point. Again, the reasoning is the same: they are generalizing from a small minority of victims (134 of the 509 persons interviewed) in order to make conclusions about all victims of identity theft.

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