Study: ID protection tools work, but you'd better comparison shop
Banks', bureaus' offerings lag behind those from other companies, report says
By Jeremy M. Simon | Published: September 23, 2011
The best identity theft protection service on the market is sold by a company you've probably never heard of, according to a recent study.
So if you're in the market for ID protection, rather than going with the products hawked by your bank or the credit bureaus, you may be better off shopping around.
In an August 2011 study, independent research firm Javelin Strategy & Research looked at two dozen ID protection products -- which varied widely in cost and services offered -- from banks, credit bureaus and other companies. While these products have their flaws and are disliked by some consumer advocates who say consumers can get better and lower-cost protection on their own, Javelin still says these products work for consumers.
"These services will save you money," says Phil Blank, managing director at Javelin and an author of the report.
And there's a lot of money to be saved because when fraud happens, consumers pay. As of mid-August, Javelin data shows the average fraud cost consumers $631 and required 33 hours to resolve.
That reality helps drive the $3.5 billion market (as of 2011) for ID protection products offered by banks and credit bureaus, as well as independent, third-party companies. To keep customers safe, these products prevent the unauthorized use of private data, monitor account activity and alert customers to any changes, block attempts by criminals to use that private information and, if fraud has occurred, attempt to restore the worthiness of consumers' accounts and credit.
To create its report, Javelin evaluated 24 major identity protection products, looking at the most comprehensive product from each independent ID protection vendor, credit bureau and financial institution selected for the survey. Javelin also considered the vendors' Better Business Bureau ratings.
So what did they find? Although ID protection services can be beneficial, Javelin found they often fall short in preventing fraud from happening in the first place. Nearly two of three products reviewed got failing grades for fraud protection. Most scored far better for fraud detection and resolution.
"There is a lot more room to grow in the area of prevention -- and prevention is the most important area for the consumer," Blank says.
Best and worst
Even the top-scoring product in the report -- Intersections' Identity Guard Total Protection, which sells for $199.95 a year and offers consumers both credit monitoring and personal information monitoring -- flopped in that area. It was awarded "best in class" distinction and had an overall score of 73 percent, but it earned a score of just 56 percent in prevention, while receiving a 77 percent in detection and 83 percent in resolution..
What set it apart? Identity Guard didn't win any categories, but ranked highly in all of them. It had the second-highest resolution score, the fourth-best detection score, and even though it was just a 56, the third-highest prevention score.
Intersections says its product deserves the honor. "Customers can bank and shop online, track their credit scores and history, and be alerted when their PII [personally identifiable information] is being misused," Steve Schwartz, Intersections' executive vice president of consumer solutions, says in an email. "Identity Guard Total Protection is a trusted source with ... an excellent track record."
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Among financial institutions, Bank of America's Privacy Assist Complete earned the highest marks, with an overall score of 67 percent. And TransUnion was top among the credit bureaus, with its TrueCredit product scoring 64 percent.
As for the lowest scoring product, that honor went to Identity Protect from Intelius. "They just didn't do well when we called to verify services with" customer service, Blank says. "They were very light in prevention and some of the resolution areas."
The other lowest scoring products were both from banks. Citi Identity Monitor earned a score of 46 percent and Fifth Third Identity Alert earned a score of 47 percent.
Room for improvement
The report also highlighted some identity protection practices that are in need of improvement -- and what Blank describes as some of the providers' "questionable practices."
Their ineffectiveness at prevention galls Paul Stephens, director of policy and advocacy with the nonprofit Privacy Rights Clearinghouse. "These services are pretty good at protecting against new account fraud, but are essentially worthless at protecting against existing account or account-takeover fraud," he says. For example, a thief may be blocked from taking out a new credit card in the consumer's name, but there is little protection against thieves who use a card skimmer device to steal a consumer's account information at a gas station, restaurant or ATM.
Also, some of the providers that give consumers a free credit report do so by supplying the free report the consumer is entitled to under the law. Thanks to the Fair Credit Reporting Act, consumers already have the right to obtain a copy of their credit report from each of the three credit bureaus (Equifax, Experian and TransUnion) once every 12 months. In other words, these vendors "aren't really giving you a free credit report, they're using the free credit report that you are entitled to," Blank says.
Shocked? Experts aren't. "Sometimes identity protection companies provide the same things consumers can get for free, but charge them for it," says Lisa Schifferle, an attorney in the Federal Trade Commission's division of privacy and identity protection.
The questionable practices didn't end there. Twenty-two percent of ID protection providers surveyed use a two-step enrollment process that requires consumers to pay first and enroll later, such as online or over the phone. If the consumer isn't aware that a second step is required, they may end up paying for a service without ever getting the benefits of that service. Consumer advocates say this needs to change. "The authentication should take place at the time you sign up for the service," says Stephens.
Sometimes identity protection companies provide the same things consumers can get for free, but charge them for it.
|-- Lisa Schifferle
Attorney, FTC ID protection division
Should you pay?
Aside from those questionable practices, there are other reasons for consumers to be cautious about buying ID protection.
"It's a great study, but the one thing that I would caution consumers is to understand that in each case Javelin examined the most comprehensive product offered by a vendor," says Privacy Rights' Stephens. That means although a given vendor may rate well for the product Javelin evaluated, its other products may be less beneficial for consumers.
And it may not be necessary for consumers to pay at all. For example, Javelin's study notes three free products -- IDSafe from TrustedID, AllClear ID Free from Debix and AVAST CreditAlert Free from ID Watchdog -- that provide different types of services at no cost to consumers. "However, keep in mind that these free products never include as many services as their paid counterparts," Javelin says in its report.
"In many cases, there are mechanisms for consumers to protect themselves without having to pay for a particular identity protection product," Stephens says. He points out that certain financial institutions and the American Automobile Association (AAA) in some states may provide customers with free monitoring services. Additionally, "a consumer can get free annual reports staggered through the year instead of paying for a monitoring service; they can place their own fraud alerts," Chi Chi Wu, staff attorney with the National Consumer Law Center, says in an email. Even consumers who haven't been the victims of ID theft can place fraud alerts on their credit reports, Privacy Rights says.
That's why some consumer advocates don't recommend that consumers use ID protection services. "I am not a big believer in these products -- sometimes they don't seem to offer much beyond what the consumer can do him or herself," says Wu.
She recommends other options. "In my opinion, probably the strongest ID theft prevention measure, especially for victims of a breach or prior ID theft, is a security freeze -- something a consumer can do himself or herself for a modest fee set by law, and that the report really didn't focus on," Wu says. A freeze essentially locks out creditors -- or anyone else -- from accessing a consumer's credit report for the purpose of opening new lines of credit.
Nonetheless, Javelin maintains that consumers can benefit from the types of products included on its scorecard. "When you have someone who has stolen your identity, these guys have experience; they're the pros," says Blank.
See related: Put your credit report on ice with a credit freeze
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