Should you pay for identity theft protection?

According to a report released by the Federal Trade Commission (FTC), identity theft complaints increased by 47% from 2013 to 2015. Needless to say, identity theft is on the rise, and many people are concerned they could become a victim. Like any crime, totally preventing identity theft is practically impossible. However, that hasn’t stopped many so-called identity theft protection and prevention companies from selling services that promise to do just that.

As a consumer, it’s important to be cautious when purchasing identity theft services simply out of fear. Sometimes, fear-based marketing tactics can cause consumers to pay or overpay for services they may not need, or worse yet, may not be even be effective.

Before we dive into the details of assessing the value of the ID theft protection service you are considering, let’s do a quick recap on the types of identity theft and common services offered to help with this issue. 

What to Watch Out for:

1. Misleading Claims and Offerings

Many consumers are reeled in with hefty promises of $1 million or $5 million in “coverage” and may not know what that coverage entails. When you see these numbers, it usually means that a company will commit up to $1 million in resources to help you through the resolution process. That might mean things like covering notarized forms or other professional services needed in the resolution process. Some companies will cover lost wages from missing work due to dealing with an ID theft incident.

In many cases, your bank or credit card company will have policies in place so that you are not liable for fraudulent transactions anyway, so the millions in “coverage” wouldn’t be applied toward recovering that property. (Some services will reimburse fraudulent transactions but with stipulations around reporting time frames, proof of criminal activity, and making sure you aren’t covered already under another benefit.) Resolution services can be extremely helpful, but they usually only run a few hundred dollars, not even close to millions!


2. Excessive Offerings

Looking at the laundry list of items that a common identity theft protection company offers can make these services look like consummate, comprehensive coverage. IDShield, a LegalShield product, promises to monitor so many things that you wonder what could fall through the cracks: 10 phone numbers, 10 email addresses, your driver’s license number, and a host of other personal data points. 

With all these monitoring claims, it makes you feel good about spending that $20 or $30 per month for a service, but the fact of the matter is that it’s highly unlikely that you’ll get the medical ID number monitoring promised. A quick visit to the Better Business Bureau complaint section shows this to be true for many companies. Common complaints for identity theft protection services reveal monitoring and alerts don’t always happen as promised. In these complaints, people report moving, opening new accounts, and other activities they are sure should trigger alerts, but receive no notifications.

3. Services You Can Do Yourself or Already Have Coverage For

Eva Velasquez, president and CEO of the Identity Theft Resource Center (ITRC) says there are many things you can do yourself if you have the time. ITRC provides resources for helping people execute the DIY version of identity fraud resolution. Velasquez feels you shouldn’t be shut out of help in the midst of an identity fraud crisis because you don’t have the money to handle it.

Velasquez also encourages people to check other places they might already have identity theft protection benefits in place at low or no charge. Insurance riders, employee benefit packages, credit cards, credit unions, banks, or motor clubs are are few places where protections could already be in place for you.

4. Aggressive or Questionable Marketing Tactics

When a data breach occurs, the company whose customers’ information was compromised typically offers identity theft protection services to these customers at no charge. The provider of these services is call the data breach vendor. In the famous Target data breach of 2013, Target provided a basic service to customers through Experian’s product, ProtectMyID. There were many complaints citing Experian’s aggressive attempts to upsell vulnerable customers to monthly subscriptions because the free services offered by Target and the data breach vendor were limited in benefits.


5. Limited Offerings

In the example above, Target opted to provide data breach victims a pared-down package of the complete ProtectMyID package. This package monitored only one credit-reporting agency (CRA), while complaints surfaced of victims who would eventually face identity fraud due to the data breach and poor vigilance of their personally identifiable information post-breach.

Zander Insurance offers services that focus heavily on the resolution side. They offer monitoring of your personal information in varied capacities, but only have reminders to check your free credit report each year. Their take is that CRA monitoring provides a false sense of security and that the real value is in the resolutions services they offer.

6. Not Following Best Security Practices

Enrolling in an ID theft protection service means you’ll likely have to give your service provider a lot of your precious personal information. The idea is that they will be able to effectively monitor all the data points you provide for fraudulent activity.

If this is the case, you’ll want to make sure that your information is collected, stored, and accessed in a secure manner. A major player in the identity theft protection space, LifeLock, was fined by the FTC in 2010 and 2014 for poor information security practices, among other things. 

7. Complaints, Lawsuits, and Fines

Eva Velasquez of the ITRC, who also worked for the Better Business Bureau for five years, says third-party verification agencies like the BBB can be a consumer’s best friend when vetting identity theft protection services. Search sites like Consumer Affairs and the BBB for common complaints about an ID theft protection service you are considering. The complaints section is a great resource to learn about common problems and misunderstandings with a particular ID theft protection company.

Tips on Evaluating Identity Theft Protection Services

As a reminder, these services will help you mainly with detection and resolution, not prevention. There is no perfect identity theft protection solution, only a solution that is perfect for you. To start, you’ll have to play an active role in protecting your personal information and reducing your risk for ID theft.

In the end, it’s true that there are many services you could perform on your own to resolve ID fraud, but you may not have the time. So one person’s value-add would be different for another. Read the fine print and understand exactly what you are paying for. Check third-party consumer advocacy sites with honest reviews about identity theft protection service shortfalls and gaps in coverage.

Understand your specific needs, time constraints, and risk exposure to find the solution that provides the most value, not the one that feeds off your worst fears. 

MagnifyMoney is a price comparison and financial education website, founded by former bankers who use their knowledge of how the system works to help you save money.

Tegna


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