This is indeed a critical issue and I certainly hope the American public is paying close, close attention to the fact that identity theft is very real and very prevalent. Identity thieves are constantly looking for new scams to rip off hard-working, law-abiding Americans. The stakes could not be higher for the security of the families we represent. In fact, I will be hosting a workshop in Raleigh, North Carolina in the next month or so - to educate North Carolinians on ways to prevent identity theft and what to do if - heaven forbid - they become a victim.
Identity theft is often cited as the fastest growing crime in the nation, and a large portion of the victims include our senior citizens. According to a recent Federal Trade Commission (FTC) survey, approximately 10 million Americans are victimized by identity thieves every year at an astonishing cost of $48 billion to businesses and an additional $5 billion to consumers. The survey focused on two major categories of identity theft. First, the misuse of personal accounts and second, the creation of new accounts in the victim's name. Not surprisingly, the survey showed a direct correlation between the type of identity theft and its cost to victims, including the time and money spent resolving the problems.
For example, although people who had new accounts opened in their names made up only one-third of the victims, they suffered two-thirds of the direct financial harm. The FTC survey also found that victims of these two categories cumulatively spent almost 300 million hours—or an average of 30 hours per person—correcting their records and reclaiming their reputation for good credit. Precise statistics are unfortunately not available to properly gauge the full extent of the problem, since some 40 percent of identity theft cases are believed to involve friends or family members and are never reported.
While financial institutions are liable for the larger part of identity theft fraud, consumers are hurt in more profound ways. They must spend hours and hours of their time to reverse the damage done. And they bear the burden of the insecurity, inconvenience, and the resulting loss from the fraud committed against them.
A gentleman from Cary, North Carolina told The Raleigh News & Observer, and I quote, "I wouldn't wish it upon my worst enemy." He went on to describe the mess of trying to restore his credit, being turned down for a credit card and having to pay a higher interest rate for a car loan because of his damaged credit. The hardest thing, he said, was feeling "powerless to do anything once the fraud started to happen." There can be no doubt that when fraud is committed, every law-abiding citizen loses.
Consumers are left to foot part of the bill through the higher cost of services from financial institutions. In March, this committee held a hearing that focused on two cases in which institutions made public disclosures, as we've heard, with regard to data security breaches. At that hearing we heard testimony from the Chair of the Federal Trade Commission who detailed a very reasonable position on this subject and testified that Congress should consider requiring prompt notification only when there is a significant risk to consumers. This makes sense—unnecessary notifications could scare consumers, as well as numb them to the risks, and such notification carries a great cost. As a former FTC Commissioner, I have a great deal of respect for their views.
I am pleased we can examine these issues today and I look forward to working with my colleagues to ultimately pass legislation that requires such disclosures when there is a significant risk to consumers. Thank you Mr. Chairman.