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Is ID theft protection worth the cost?

By Bill Gephardt | Posted - Apr 24th, 2013 @ 9:18am

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SALT LAKE CITY — If you're worried about someone stealing your financial identity, you might consider using one of the many ID protection services that have popped up in recent years.

It's a big industry. Some analysts estimate it will grow to $6 billion a year by 2015. But is it worth it?

Millions of Americans have been persuaded to spend anywhere from $100 to $300 a year on theft protection. The marketing can make it look like something you can't live without.

"There's no disguising identity theft. With 12 million victims every year, you could spend $2,000 just to clear your name," one advertisement said.

Credit expert Al Bingham has watched what he calls "scare tactics" grow ID theft protection into a billion-dollar industry.

"They go out there and scare consumers that they've got to protect their information," he said.

A Larger Problem
A far bigger crime the ID protection companies cannot protect you from is the theft of your Social Security number.

"There's no way to really do it," said Scott Morrill, an identity theft expert with the Utah Attorney General's Office. He said some 40 million Americans have at least one other person using their Social Security number for employment or credit, or both. But unless federal law changes, it's nearly impossible to stop someone from using your number.

"There is a lot of privacy legislation in place, especially on the federal side that prohibits them from notifying the consumer that someone else is using their Social Security number," he explained.

Credit expert Al Bingham added, "Once that Social Security number is out there, there's no end to where they can take that number."

While he said identity theft has certainly grown in recent years, it's still fairly minimal.

"You're not seeing 20 out of 100 people that have ID theft," he pointed out.

The U.S. Department of Justice agrees, and said less than 1 percent of households reported someone opening unauthorized credit in their name, or stealing their tax refunds or tapping into their medical benefits.

One of the main benefits touted by ID theft protection services is that they'll monitor the big credit bureaus -- Transunion, Experian and Equifax -- for new credit requests in your name. But, you can do that yourself.

"I'll go to once every three or four months and pull my credit report," Bingham said.

Through you can request a free credit report from each of the three credit bureaus once a year. Bingham said by staggering your requests, you can get a fresh report every four months. They're the same reports identity theft protection companies use when they charge you to monitor your credit.

Another benefit many protection companies tout is thousands of dollars in identity theft reimbursement.

Fraud Alerts and Credit Freezes
If you are a victim of identity theft and have created an Identity Theft Report, you may want to place an extended fraud alert or a credit freeze on your credit file. There are important differences between these two options:
  • Credit Freeze: Generally stops all access to your credit report. Availability depends on state law or a consumer reporting company's policies.
  • Fraud Alert: Permits creditors to get your report as long as they take steps to verify your identity. Federal rights intended for people who believe they are, or who actually have been, identity theft victims.

    Some states charge a fee for placing or removing a credit freeze, but it's free to place or remove a fraud alert.
Source: FTC

"For the most part, that is not a benefit," Bingham said.

According to the Federal Trade Commission, in more than half of identity theft cases, victims had no out-of-pocket expenses. Victims are only liable for up to $50 in unauthorized credit card charges, and most card companies waive those.

"If you never incurred the charges, you've got a police report, you've got documentation you never signed up for this - the charges on every credit card agreement I know of, (the company has to) back off those charges," he said.

There are more steps consumers can take to prevent theft without resorting to an ID theft protection service.

For example, they can contact the credit bureaus and put a fraud alert on their credit. Not only does it trigger a free credit report, it also warns potential lenders to investigate applications for credit or employment.


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