What, You Mean the Financial Services Industry Profits from ID Theft?!

An interesting story in today’s New York Times tells us something we already knew: The credit bureaus are making money from identity theft by selling fraud watch services that aren’t always what they’re cracked up to be (“Protectors, Too, Gather Profits from ID Theft”). One woman interviewed for the article, who’s filed a lawsuit against the credit bureaus, among others, says of credit monitoring that “the whole thing a sham.” The article continues:

Credit monitoring has quickly gained traction with consumers through aggressive advertising that often promotes its value in protecting against identity theft. But its abilities are far more limited than is commonly perceived.

In the meantime, measures that could stem fraud from identity theft — like legislation empowering consumers to block access to their credit records, making it impossible to extend new credit — have faced stiff resistance from industry groups.

It’s nice to see mainstream attention to this issue. In fact, last July, we proffered some advice on how to set up free, DIY credit monitoring that takes advantage of the free annual credit reports Congress has entitled to you. Which reminds me, I think I’m due to file for my next one.

One additional caveat since that article was published: There’s increasing evidence that if you do need to place a lock on your credit report, you should call all three credit bureaus to do so, rather than relying on one bureau to tell the other two (as they claim to do). I say this because not long ago, I had a rather disturbing conversation with Julie Fergerson of Debix (a competing identity theft protection vendor), who did an interesting experiment in which she tried to put credit freezes on the credit reports of 54 volunteers. Forty percent of the time, the alert was not passed onto the other credit bureaus correctly, oftentimes because the address data did not match exactly.

Meanwhile, Fergerson complained about the number of upsells consumers have to sit through whenever they call one of the credit bureaus. With one of them, she counted no less than 13 different prompts trying to sell her something. Talk about salesmanship! No wonder that even the person quoted in the Times as calling credit monitoring a sham is still paying for the service. “[I]t is the best tool available at this time,” she says. Maybe I need to buy some stock myself.

-Sarah Scalet