If you're worried about identity theft, there are plenty of products and services out there promising to safeguard your personal information. But many of them are just looking to earn a dime from consumer fear and don't provide anything that the consumer can't do for himself -- for free.Experian ( EXPGY), a credit-report provider, is suing one company called LifeLock, alleging that it engaged in deceptive marketing practices and broke federal law by placing unwarranted fraud alerts on thousands of consumers' reports. The company, which promises to guard personal information with a $1 million guarantee if an identity thief is successful, is also facing several class-action lawsuits regarding its marketing practices and the difficulty consumers face in actually collecting the guarantee when their information is compromised. Before the suit, LifeLock CEO Todd Davis became the target of several identity thieves after displaying his social-security number in advertising to prove that the LifeLock service really worked. One Texan got away with a $500 advance loan on Davis' paycheck. (In a statement, Davis insisted that "the whole incident proves that LifeLock works," because he recouped the cash.) While LifeLock has garnered the most attention, it's certainly not alone. There's the buySAFE Internet tool bar, the IdentitySweep software, the TrustedID and Identity Guard services, the Debix "identity-theft prevention tool," LockDownMyID.com and scores of other products, books and services that promise to protect your identity and your wallet. These outlets are cashing in on the identity theft hype, which affects a relatively small segment of the population but has effectively stoked a wave of consumer fear, says Fred Cate, an Indiana University professor and expert on identity theft issues.
"It's silly to buy a service for something you can get for free -- free credit reports, fraud alerts. I can't imagine why you would pay somebody for that," he says. Consumers are entitled to one free credit report from each of the three credit agencies -- Equifax ( EFX), Experian, and TransUnion -- each year, according to Claudia Farrell, spokeswoman for the Federal Trade Commission. They can also place a fraud alert for free, while credit-freeze regulation varies by state. Cate notes that despite the extreme stories of people whose finances were destroyed by identity crooks or those who had to undergo a lot of duress to right the wrongs of such a criminal, identity theft is actually declining. Most incidents stem from carelessness and naivete -- forgetting a credit-card somewhere, giving over a Social Security number to an unauthorized person or buying into scams on the Web. Furthermore, most victims get matters resolved and cash reimbursed in a short period of time through card issuers, banks and credit agencies. "It's not like buying flood insurance when the water's rising; it's like buying flood insurance when a drought is looming," says Cate. "And certainly there are more of these stories that are apocryphal than are true." Joyce Cavanagh, an associate professor at Texas A&M University and an expert on identity theft, considers security breaches at companies that gather and store consumer data to be the biggest threat. PrivacyRights.org maintains an ominous and extensive list of such breaches -- which have occurred at every imaginable entity, including government agencies, universities, doctors offices, retail stores, investment groups, phone companies and Domino's pizza.
Even the Department of Consumer Affairs in Sacramento, Calif., had a recent incident in which an employee sent the Social Security numbers of 5,000 staff members to her Yahoo e-mail account on her last day of work. "It's not from people stealing your wallet or going through your trash," says Cavanagh. "It's people who work for the businesses who have our personal information." The security expert also notes the irony of giving out all your personal information to a company in order to protect that information - it's just as likely as any other outlet to have a disgruntled employee or data breach. Cavanagh suggests taking proactive steps to guard your own information the old-fashioned way: Monitor your accounts and credit report; be stingy about giving out your Social Security and credit-card numbers; and if a store or organization demands information that you don't think is necessary to provide, simply take your business elsewhere. "There's no 100% guaranteed way to prevent identity theft," she notes. "What you do is you minimize your risk by your behavior, guarding your personal information and keeping track of your credit report." The important thing to keep in mind when hearing a company's sales pitch to protect your information is that most of them get paid to use the same resources available to you - for free. Like many businesses, they are simply trying to earn some cash by doing the work for you and building upon the hype about a problem that is less serious than is often presented.
"Often what they seem to be offering you is too good to be true," says Cate. "And if it is too good to be true, it isn't true."