Identity Theft
Security

How to deploy no-cost, do-it-yourself ID theft protection

by Broderick Perkins

(1/20/2012) ERATE Exclusive - Spooked, cajoled and conned consumers finance a multi-billion dollar ID theft protection racket that offers few if any benefits. Buying identity theft protection is a lot like buying a product warranty because it's often not worth the cost of the paper to write the contract.

Yet 50 million consumers - about one in six of all Americans - signed up for some form of ID theft protection in 2010, according to Consumer Reports.

Paying $100 to $300 a year, they are financing what amounts to an annual $5 billion to $15 billion business offering "benefits" that consumers can provide for their own protection.

"There are cheaper and more effective ways to protect yourself from identity theft," said Noreen Perrotta in a Consumer Reports (CR) Money Adviser investigation of products sold by more than two dozen banks, credit-reporting bureaus and independent companies.

Scared straight into buying

The study found ID theft protection services are often offered by fear mongers using outdated claims about crime to drum up business.

Identity fraud was down in 2010, according to the latest statistics.

Fraud is down because financial institutions are doing a better job at covering their assets' information and consumers have become better adept at keeping an eye on their accounts, thanks to electronic banking.

Electronic banking allows you to view your accounts 24/7/365, rather than waiting for the monthly statement. Keeping close tabs on your accounts allows you to spot suspicious activity virtually as soon as it happens. Many electronic accounts email you alerts for virtually any activity on your account.

Trial offer come-ons

CR says large regional bank has offered "30-days of service for $1" for ID protection services, provided you sign up with automatic credit card billing to pay the fee.

Once the bank has your credit card information and the trial period ends, it automatically charges your card a monthly membership higher than the $1 teaser rate. You can cancel, but the onus is on you to do so. Until you do, automatic payments drain your account.

Don't sign up for offers that come with teaser rates until you've checked out the company and its service with the Better Business Bureau or other consumer complaint centers.

Credit monitoring

Companies offering credit monitoring services to protect against ID theft say they do so by monitoring your credit report to look for new accounts or anomalies that pop up.

With our without the service, you aren't liable for accounts you didn't open and have a minimum to zero liability for fraudulent use of existing accounts.

What's more, you can monitor your own credit file with AnnualCreditReport.com, the one and only federally sanctioned online location to get your free credit reports. Consider typing "https://www.annualcreditreport.com" into your browser, rather than clicking on emailed or online links to the site. Some online and emailed scams will show "AnnualCreditReport" but clicking on the link will lead you down a slippery slope.

Federally mandated, AnnualCreditReport.com is operated by the big three credit reporting agencies, public companies, Equifax, Experian and TransUnion. Once you arrive, follow directions carefully.

If you get side-tracked and directed to one of the sponsoring credit reporting agencies you could get solicited for credit monitoring services, "free" credit score offers, or other fee-based services. Ignore the come-ons and go for your free credit reports.

You get three free credit reports a year - one free from each of the three agencies each year. If you've never examined your credit report, obtain all three immediately. Later, or if you received them all last year, get one now from one agency, another in four months from another agencies and the final one four months later. That effectively sets up your own credit report monitoring service - at no charge.

Along with electronic banking alerts and visits, you've effectively set up a blanket of surveillance for your financial accounts.

Internet monitoring

Some credit monitoring services include "internet surveillance," supposedly to alert you if personal information - Social Security number, credit-card or bank-account numbers - are found dangling out on the World Wide Web.

Consumer Reports says, once your information is out on the Internet, there's little you can do. Internet monitoring offers a false sense of security.

You may have to work through the proper channels to change credit card and bank account numbers and put a freeze on your credit report before the information is used.

Identity theft insurance

One service says for $16 a month you can get "up to $1 million in identity theft insurance," but any such service is only secondary to coverage that already exists in your homeowners, renter's or auto insurance (for theft). Also, the extra coverage primarily covers incidentals - notary fees, credit-report costs, loan re-application fees, and a ceiling on lost wages - and then only for specific costs related to fixing your credit records.

Bottom line

Consumer Reports says your best insurance is keeping private information safe from prying eyes, properly shredding and discarding outdated files and documents, electronically monitoring your accounts frequently and keeping tabs on your credit report as prescribed above.

"There are many things you can do for free, such as signing up for online access to your bank and credit accounts and monitoring them frequently," said Perrotta.

For the full story, online or in print, from the February issue of Consumer Reports Money Adviser, the required subscription is worth the price of admission.