ID theft down 28 percent in U.S. in 2010: Survey

American Express and MasterCard credit cards are shown in Washington June 25, 2008.

NEW YORK (Reuters) - The number of victims of identity theft dropped by more than a quarter in the U.S. last year, the largest annual fall on record, but individual victims lost more money on average than ever before.

The annual survey of consumer fraud from Javelin Strategy & Research released on Tuesday showed total annual reported fraud was down to $37 billion in 2010 from $56 billion in 2009, but the average out-of-pocket loss soared to $631 from $387 -- an increase of more than 60 percent.

James Van Dyke, the founder of Javelin Strategy & Research, said banks have improved at protecting existing credit card holders but there was still a large problem with criminals cloning identities to take new cards out in other people's names.

"The rise in the amount the average victim lost can be attributed to the cloning of credit cards in other people's names and rising debit card fraud, which usually take longer to detect and lead to higher losses," Van Dyke said.

Some 8.1 million people -- 3.5 percent of the U.S. population -- were victims of identity theft last year. That was down 28 percent from 11 million people in 2009. The number of victims was the lowest since 2007, before the financial crisis hit.

Javelin has been running the survey for eight years and Van Dyke said the company has confirmed its speculation of a correlation between identity theft and the state of the economy, especially the retail sector.

"As retail sales go up, the identity fraud rate sinks. When retail sales decrease, the identity fraud rate rises," Van Dyke said. "This finding may be due to many factors, such as higher levels of investment in security in better economic times and/or greater allowance of questionable transactions in times of economic need."

While most types of fraud were down overall, "friendly fraud" -- when the victim is known to the criminal -- was up 7 percent last year, with those aged 25 to 34 most likely to be victims.

(Reporting by David Sheppard; Editing by Daniel Trotta and Greg McCune)