ID theft creates opportunities for data companies

LOS ANGELES: 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 information, 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 Plc, 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.