Companies offering to protect consumers from identity theft tout their ability to shield your personal financial information from fraud.
But some consumer groups caution you to think twice before shelling out money for those services because in many cases, they say, identity theft protection services fall far short of being a financial security blanket.
The Consumer Federation of America recently examined 16 identity protection firms and found that, in most cases, they gave unclear, confusing or misleading information about the services they provide and the extent of the protection consumers were buying.
The companies studied offered a wide range of services from monitoring credit reports and placing fraud alerts in consumers’ credit files to scouring the Internet and public records for indicators that a customer’s information has been compromised.
Susan Grant, the federation’s director of consumer protection and author of the report, found that some of the companies exaggerated their ability to protect customers’ identities. For example, credit monitoring might alert you to an attempt by a crook to open a new credit account in your name but won’t red flag fraud occurring in an existing account, such as unauthorized use of your credit card number.
In many cases, the companies were charging consumers for services they could perform for themselves for free or at minimal cost — such as getting your annual free credit report or putting a freeze on your report that helps block new lines of credit in your name.
Grant concluded that among several characteristics, the most valuable identity theft protection services are those that clearly explain what they do and the cost, monitor databases unavailable to the average consumer, provide assistance, and not just advice, if a consumer’s information is stolen, and live up to guarantees without burying exceptions in the fine print.
Of the 16 companies Grant studied, none met those standards, she said. “Some of these services may be helpful to consumers, but none can absolutely prevent your personal information from being stolen or used,” Grant said in the report.
Grant’s findings echo those of other consumer groups who have questioned the usefulness of identity theft services.
Linda Foley, founder of the non-profit Identity Theft Resource Center, said identity theft protection services prey on consumers’ fears and give them a false sense of financial security. Foley said that while some services are better than others, they all have gaps in protection that can leave consumers vulnerable to fraud.
“I’m not saying any of the products are bad. Just understand the limitations, do your homework and check them out,” Foley said, adding, “We do not advocate driving around with your Social Security number on a billboard.”
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That last comment was a reference to commercials from LifeLock identity security company, whose CEO, Todd Davis, exposed his Social Security number to the world as proof of his confidence in his product.
LifeLock is one of the companies examined in the federation’s study.
In a statement, Mike Prusinski, a spokesman for LifeLock, said the company is confident that it provides a valuable service to consumers, simplifying the ID protection process.
“We always encourage consumers to check all the possible options before deciding on any identity theft protection service, but when fully educated about identity theft, they will understand that proactive protection [through LifeLock or done themselves] is better than doing nothing at all,” Prusinski said.
Scott Mitic, CEO of TrustedID, said his company — which was also studied by the consumer federation — has access to information, such as black market financial data trading, that is unavailable to the public and not easily understood by people who aren’t trained in financial data analysis. Mitic acknowledged that his company offers services that customers can do themselves but said that the typical consumer can’t establish the same kind of checks and balances.
“We bundle [services consumers can do] with the things you can’t do yourself and put it in one place to make it easier,” Mitic said. “There are people who want convenience and peace of mind without a lot of work, and that’s what we provide.”
That’s what a lot of these services boil down to: convenience and psychology.
But if you decide to go the do-it-yourself identify protection route, there are a lot of resources out there to help. I would start with the Federal Trade Commission, whose Web site has an extensive section on identity theft: ftc.gov/idtheft.
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