Monday, June 11, 2007
ID Theft Guardians Offer Protection For a Price
If you're like lots of Americans, you're increasingly wary of identity theft. But should you pay LifeLock or a similar company a few bucks to more than US$100 a year to protect your identity? A host of new companies has sprung up recently offering products including credit monitoring, fraud alerts and identity theft insurance. Some will even unleash robotic software to scour the Internet and ferret out whether crooks are selling your credit card number in chat rooms. Are they worth it? Or are they hyping consumer fears to turn a quick profit?
"It's a very profitable business, because for the most part the services that are being provided cost them virtually nothing -- and generally they are things you can do for yourself at little or no cost," said Paul Stephens of the nonprofit Privacy Rights Clearinghouse. Identity theft prevention services agree that motivated consumers can do many things to protect themselves. They say consumers pay for the convenience and expertise of having someone else do it for them -- like having your accountant prepare your taxes.
"We all live with the fact cars are stolen every day; that's why we have car alarms and insurance," said Todd Davis, CEO and founder of Tempe, Ariz.-based LifeLock, one of the fastest-growing identity theft prevention services. A surge in stolen data, he contends, has "created a valid need for these services."
More than 50 million people have been told in the last three years that their personal information has been improperly disclosed. The Identity Theft Resource Center lists 136 data breaches so far just this year, compromising more than 56 million records. A survey released last week suggests 84 percent of Americans believe identity theft can happen at any time, up from 81 percent a year ago. The survey by the Identity Theft Resource Center and Fellowes, a shredder manufacturer, reported 59 percent of people felt vulnerable -- up from 50 percent a year ago.
"Consumers have very good reason to be afraid," said Jay Foley, executive director of the Identity Theft Resource Center. "We've seen recently that no one is exempt."
Foley warns consumers that no prevention program is foolproof, so consumers need to be aware of what they are getting for their money compared with what they can do for themselves. No one directly regulates the industry. The Federal Trade Commission monitors its marketing practices.
"The key here is there should be no misrepresentation that this is the only way you can get this service," said Joel Winston, FTC associate director of privacy and identity protection. "In theory, it could provide a benefit in some cases. Is it worth it? That's up to the consumer."
A main offering of the ID protection companies is credit monitoring, which entails watching your credit report for unauthorized access, such as someone taking out a new credit card account or buying a stereo in your name.
The three major credit bureaus were the first to offer this service for a fee. Steve Ely, president of Equifax's personal solutions, said credit monitoring is a tool that "provides peace of mind." If there is unauthorized access of your report, "that's the big red flag that you have to immediately take action and notify the creditor that opened up the account in your name," he said.
Equifax offers three monitoring programs. The least costly is a monthly report. For $12.95 a month, you can get daily reports from all three credit bureaus, including Experian and TransUnion.
Consumer groups point out the government now allows consumers one free credit report from each of the three credit bureaus. By spacing out their requests, consumers can access their credit reports for free once every four months.
In addition, consumers who suspect their information has been compromised can place a fraud alert on their credit report without having to pay a company to do it for them. The alert raises a red flag any time a creditor enters into a transaction with someone using the person's identity. It can be renewed every 90 days.
In about 25 states, consumers can also place a "freeze" on their credit report, which means no one, including creditors, can access it without permission. Some states, including Kansas, limit credit report freezes to consumers who can prove with a police report they have been the victim of identity theft.Missouri does not have a law allowing consumers to freeze their credit report. Still, Ely said, many consumers don't want the hassle of monitoring their own reports. "Most people don't want to do all that, so we do it for them."
LifeLock promotes its monitoring package with individual $1 million insurance polices. If criminals "clean out your bank account, we would give you your money back," said CEO and founder Todd Davis, who markets the value of LifeLock's protection by posting his own Social Security number on his company's Web site.
Consumer groups, however, say most identity theft losses amount to less than $600. Most of the hassle with identity theft is cleaning up your credit and restoring your good name.
Still, the FTC's Winston said insurance can be a benefit if, for example, substantial losses result from someone opening a new account in your name. However, he compares insurance to extended warranties on appliances. They can be useful but are often oversold. LifeLock and other companies also will assist consumers whose credit has been compromised, providing the necessary forms to alert creditors.
Also, Davis said, if an impostor does something wrong in a consumer's name, "we'll bail you out of jail and get you a lawyer." Davis boasts that LifeLock is growing at the rate of two accounts every minute.
New entries in the identity theft prevention business tout their high-tech ability to scour public records and the Internet to ferret out data breaches before they occur. The services say they can create a personal profile that can be matched against data that show up somewhere else. If your credit card is being used in a way that doesn't match your profile, you are alerted.
IDWatch, a service owned by Bellevue, Wash.-based Intelius, advertises software that thwarts "black market" thieves who try to sell your credit card in an Internet chat room. "What we've done at Intelius is not only monitor credit report information but also monitor public record information," said Ed Petersen, head of sales and marketing.
Intelius has a leg up in its technical ability to forage the Internet. It already is the largest provider of public information on the Internet. Most of its money comes from conducting background checks for big businesses. IDWatch can find out whether someone obtained a phone number in your name, used your Social Security number or if someone was arrested in your name, Petersen said.
"You could check these things on your own, checking public records and your credit record. But trying to make sense of it -- you can't really do yourself," Petersen said. IDWatch offers packages beginning at $9.95 a month for three months, $7.95 a month for a year and $4.95 a month for three years. LifeLock recently announced its own public records search program in partnership with MyPublicInfo.
Consumer groups point out, however, that most identity theft remains low-tech -- more dependent on dumpster diving than Internet breaches. Consumers can protect themselves by being careful with personal information, shredding documents and watching what they carry in their wallets.
The FTC's Winston raises a paradoxical concern: These companies also collect personal consumer data to do their jobs. That means consumers now have to carefully check out the companies they are trusting to keep a watchful eye on their credit. So far, it appears, they will have to do that themselves.
Join The Guardian eCommerce Privacy Seal Program.
"It's a very profitable business, because for the most part the services that are being provided cost them virtually nothing -- and generally they are things you can do for yourself at little or no cost," said Paul Stephens of the nonprofit Privacy Rights Clearinghouse. Identity theft prevention services agree that motivated consumers can do many things to protect themselves. They say consumers pay for the convenience and expertise of having someone else do it for them -- like having your accountant prepare your taxes.
"We all live with the fact cars are stolen every day; that's why we have car alarms and insurance," said Todd Davis, CEO and founder of Tempe, Ariz.-based LifeLock, one of the fastest-growing identity theft prevention services. A surge in stolen data, he contends, has "created a valid need for these services."
More than 50 million people have been told in the last three years that their personal information has been improperly disclosed. The Identity Theft Resource Center lists 136 data breaches so far just this year, compromising more than 56 million records. A survey released last week suggests 84 percent of Americans believe identity theft can happen at any time, up from 81 percent a year ago. The survey by the Identity Theft Resource Center and Fellowes, a shredder manufacturer, reported 59 percent of people felt vulnerable -- up from 50 percent a year ago.
"Consumers have very good reason to be afraid," said Jay Foley, executive director of the Identity Theft Resource Center. "We've seen recently that no one is exempt."
Foley warns consumers that no prevention program is foolproof, so consumers need to be aware of what they are getting for their money compared with what they can do for themselves. No one directly regulates the industry. The Federal Trade Commission monitors its marketing practices.
"The key here is there should be no misrepresentation that this is the only way you can get this service," said Joel Winston, FTC associate director of privacy and identity protection. "In theory, it could provide a benefit in some cases. Is it worth it? That's up to the consumer."
A main offering of the ID protection companies is credit monitoring, which entails watching your credit report for unauthorized access, such as someone taking out a new credit card account or buying a stereo in your name.
The three major credit bureaus were the first to offer this service for a fee. Steve Ely, president of Equifax's personal solutions, said credit monitoring is a tool that "provides peace of mind." If there is unauthorized access of your report, "that's the big red flag that you have to immediately take action and notify the creditor that opened up the account in your name," he said.
Equifax offers three monitoring programs. The least costly is a monthly report. For $12.95 a month, you can get daily reports from all three credit bureaus, including Experian and TransUnion.
Consumer groups point out the government now allows consumers one free credit report from each of the three credit bureaus. By spacing out their requests, consumers can access their credit reports for free once every four months.
In addition, consumers who suspect their information has been compromised can place a fraud alert on their credit report without having to pay a company to do it for them. The alert raises a red flag any time a creditor enters into a transaction with someone using the person's identity. It can be renewed every 90 days.
In about 25 states, consumers can also place a "freeze" on their credit report, which means no one, including creditors, can access it without permission. Some states, including Kansas, limit credit report freezes to consumers who can prove with a police report they have been the victim of identity theft.Missouri does not have a law allowing consumers to freeze their credit report. Still, Ely said, many consumers don't want the hassle of monitoring their own reports. "Most people don't want to do all that, so we do it for them."
LifeLock promotes its monitoring package with individual $1 million insurance polices. If criminals "clean out your bank account, we would give you your money back," said CEO and founder Todd Davis, who markets the value of LifeLock's protection by posting his own Social Security number on his company's Web site.
Consumer groups, however, say most identity theft losses amount to less than $600. Most of the hassle with identity theft is cleaning up your credit and restoring your good name.
Still, the FTC's Winston said insurance can be a benefit if, for example, substantial losses result from someone opening a new account in your name. However, he compares insurance to extended warranties on appliances. They can be useful but are often oversold. LifeLock and other companies also will assist consumers whose credit has been compromised, providing the necessary forms to alert creditors.
Also, Davis said, if an impostor does something wrong in a consumer's name, "we'll bail you out of jail and get you a lawyer." Davis boasts that LifeLock is growing at the rate of two accounts every minute.
New entries in the identity theft prevention business tout their high-tech ability to scour public records and the Internet to ferret out data breaches before they occur. The services say they can create a personal profile that can be matched against data that show up somewhere else. If your credit card is being used in a way that doesn't match your profile, you are alerted.
IDWatch, a service owned by Bellevue, Wash.-based Intelius, advertises software that thwarts "black market" thieves who try to sell your credit card in an Internet chat room. "What we've done at Intelius is not only monitor credit report information but also monitor public record information," said Ed Petersen, head of sales and marketing.
Intelius has a leg up in its technical ability to forage the Internet. It already is the largest provider of public information on the Internet. Most of its money comes from conducting background checks for big businesses. IDWatch can find out whether someone obtained a phone number in your name, used your Social Security number or if someone was arrested in your name, Petersen said.
"You could check these things on your own, checking public records and your credit record. But trying to make sense of it -- you can't really do yourself," Petersen said. IDWatch offers packages beginning at $9.95 a month for three months, $7.95 a month for a year and $4.95 a month for three years. LifeLock recently announced its own public records search program in partnership with MyPublicInfo.
Consumer groups point out, however, that most identity theft remains low-tech -- more dependent on dumpster diving than Internet breaches. Consumers can protect themselves by being careful with personal information, shredding documents and watching what they carry in their wallets.
The FTC's Winston raises a paradoxical concern: These companies also collect personal consumer data to do their jobs. That means consumers now have to carefully check out the companies they are trusting to keep a watchful eye on their credit. So far, it appears, they will have to do that themselves.
Join The Guardian eCommerce Privacy Seal Program.
