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Consumer use of fraud alerts and credit freezes: an empirical analysis

Author

Listed:
  • Michael Vogan
  • Dubravka Ritter
  • Julia S. Cheney
  • Robert M. Hunt
  • Vyacheslav Mikhed

    (Federal Reserve Bank of Philadelphia)

Abstract

Fraud alerts ? initial fraud alerts, extended fraud alerts, and credit freezes ? help protect consumers from the consequences of identity theft. At the same time, they may impose costs on lenders, credit bureaus, and, in some instances, consumers. We analyze a unique data set of anonymized credit bureau files to understand how consumers use these alerts. We document the frequency and persistence of fraud alerts and credit freezes. Using the experience of the data breach at the South Carolina Department of Revenue, we show that consumers who file initial fraud alerts or credit freezes likely do so out of precaution. Consumers who file extended alerts are more likely to be actual victims of identity theft. We find that consumers are heterogeneous in their choice of alerts and that their choices are correlated with important characteristics found in their credit bureau files. These facts are useful for interpreting consumer responses to data breaches and for policymakers.

Suggested Citation

  • Michael Vogan & Dubravka Ritter & Julia S. Cheney & Robert M. Hunt & Vyacheslav Mikhed, 2014. "Consumer use of fraud alerts and credit freezes: an empirical analysis," Consumer Finance Institute discussion papers 14-4, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpdp:14-04
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    File URL: http://www.philadelphiafed.org/consumer-credit-and-payments/payment-cards-center/publications/discussion-papers/2014/D-2014-IdentityTheft.pdf
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    References listed on IDEAS

    as
    1. Dubravka Ritter & Michael Vogan & Robert M. Hunt & Julia S. Cheney & Vyacheslav Mikhed, 2014. "Identity theft as a teachable moment," Working Papers 14-28, Federal Reserve Bank of Philadelphia, revised 01 Sep 2014.
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    Cited by:

    1. Dubravka Ritter & Michael Vogan & Robert M. Hunt & Julia S. Cheney & Vyacheslav Mikhed, 2014. "Identity theft as a teachable moment," Working Papers 14-28, Federal Reserve Bank of Philadelphia, revised 01 Sep 2014.
    2. repec:eee:jbfina:v:88:y:2018:i:c:p:192-207 is not listed on IDEAS

    More about this item

    Keywords

    Credit report; Credit freeze; Data breach; Fraud alert; Identity theft; Fair and Accurate Credit Transactions Act (FACTA);

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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