By Alexandria Sage
For its victims, identity theft means worry, headache and countless
time spent restoring bad credit. But for some businesses, the
collective fear that consumer identities may be stolen can mean
opportunity.
The surge in identity theft, estimated to affect more than 9 million
Americans each year at a cost of $50 billion, is spurring credit
bureaus and banks to offer credit-monitoring services designed to
protect against fraud and guarantee peace of mind.
There is broad consensus that consumers need access to credit informa-
tion, but many advocates question whether some new services are
taking advantage of growing fears.
Some companies that have made headlines by compromising sensitive
consumer data in the past are now selling these watch-dog services to
their customers.
"Making money on identity theft is a growth industry and it's just not
pretty," said Pam Dixon, executive director of the nonprofit World
Privacy Forum.
This month, credit bureau Experian, a unit of Britain's GUS, settled a
U.S. Federal Trade Commission lawsuit accusing it of using the
promise of free credit reports to deceive consumers into registering
for subscription credit monitoring services.
Experian, which did not admit to wrongdoing, agreed to give up nearly
$1 million and refund affected customers.
Under a 2003 federal law, consumers are allowed one free credit report
per year from each of the three national credit bureaus, Equifax,
Experian and TransUnion.
Although some consumer advocates say ordering a report from a
different bureau every four months is an adequate method of checking
one's credit, the credit-monitoring services appeal to those who want
less hassle.
Javelin Strategy & Research recently found that the services may
"represent true increased safety for account holders, while providing
valuable benefits to the institutions that offer them," including
revenue and branding opportunity.
"These services can provide value but don't pay too much for them and
don't pay for (those that use) deceptive practices," report author
James Van Dyke said.
PROFITING FROM IDENTITY THEFT?
Increased awareness of free credit reports has been a positive for the
consumer and the company alike, said John Danaher, president of
TrueCredit, a subsidiary of TransUnion.
"Once people realize they have a credit report and ongoing access to
and management of their credit report is something that's important to
them, that in turn leads them to purchase services," Danaher said.
Credit bureau Equifax, whose $49.95 and $99.95 per- year services were
favorably cited by Javelin, reported a 21 percent rise to revenue of
$29.3 million in the second quarter of this year in its division that
includes credit monitoring services, which include daily or weekly
notification of account activity, identity theft coverage and a fraud
victim hotline.
Some of the companies now offering to monitor credit have made
headlines when their own customer information was stolen.
Wells Fargo & Co., which has experienced various data breaches since
2003, launched a $12.99 per month plan last year, while Bank of
America, which lost non-encrypted data tapes containing information on
more than a million federal account holders last December, sells a
$129 yearly monitoring program.
Both banks offer the services free for their victimized customers.
Bank of America spokeswoman Betty Riess said the company had strong
privacy and information security systems in place, while Wells Fargo
spokesman Julia Tunis said credit monitoring services and past
problems with data security should be viewed "as two separate issues."
Data broker ChoicePoint, which acknowledged in February that identity
thieves gained access to a database of roughly 145,000 consumer
profiles, sells a $24.95 "pre-employment background check" for job
seekers to find information on themselves.
But World Privacy Forum's Dixon said that companies that were not
securing data were profiting from its theft, by virtue of the new
services. "It makes you cynical," she said.
Copyright 2005 Reuters Limited.
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Alexandria Sage (reuters@telecom-digest.org)