Identity Theft Protection Companies: Separating the Hype from the Real
The identity theft prevention industry has long been defined by its habits of overpromising and underdelivering. Perhaps the best example of that was the famous LifeLock (LOCK) ad campaign, in which the company's CEO proudly announced: "My name is Todd Davis. This is my Social Security number: 457-55-5462."
The company was, in essence, boasting that its protection was so secure that its CEO could publish his Social Security number for all the world to see, without consequence.
That would have been a stupendous advertising gimmick, had LifeLock actually managed to keep his identity secure. Instead, Price's identity was repeatedly stolen and used to generate ill-gotten cash -- 13 times, in fact, by the summer of 2010.
More of the Same
If that were the industry's only issue, it could likely easily be forgiven as an act of advertising puffery -- a product making an exaggerated claim that no reasonable person would expect to hold true.
The reality is that LifeLock was only one of many identity theft companies with claims that confused consumers.
Now, thanks in large part to a campaign from the Consumer Federation of America, the industry is working to clean up its act. That's great news, because modern life can get dicey for identity theft victims, and legitimate protection and recovery services can be useful tools to help victims recover from it.
Here are just a few of the highlights of what has been or is being corrected with the help of the CFA:
LifeLock's Internet Scanning feature no longer makes the claim that it "helps stop thieves before they have a chance to commit fraud." As awesome as that would be, the reality is that your personal information likely has already been widely disseminated -- it's in the hands of your employer, governments, your bank, your credit cards, your health insurer, etc. And about the only way an observer could tell whether someone who's in possession of your information is also someone who should have it is by seeing how it's being used.
AllClear ID modified its "100 percent success rate" claim to indicate that its success is specifically in resolving financial identity theft cases. That's an important distinction, as nonfinancial identity theft can include things like stealing someone's identity to get a job or medical treatment by posing as someone else, or by criminals attempting to throw law enforcement off their trail. While financial identity theft is the type most people think of first, the other kinds can be devastating as well.
Intersection's Identity Guard stopped claiming that "the entire spectrum of your private information is protected" and instead added more details about the specific services it provides. Once again, it's a clear acknowledgment that identity theft can be a complicated mess that can reach well beyond what any monitoring and recovery service can help you clean up.
Don't Just Insure, Protect
Of course, as nice as the cleanup assist may be from any of those protection companies, it's better to avoid becoming a victim of identity theft in the first place.
While your personal information is already in too many organizations' hands for you to be completely in control of whether it gets into the hands of an identity thief, there are ways you can act to reduce your risk.
1. Protect yourself online: Use complex passwords and enable two-factor authentication for your online accounts, especially ones that have access to your financial or health information. Don't give out your passwords, and when signing in, always look at the address to make sure you're at the real site. Also, look for the "https:" and the lock icon, which indicates a secure connection.
2. Secure your paper trail: Keep your paper financial and medical records in a secure place, such as a fire safe. When it's time to dispose of old records that contain your personal data, shred them using a cross-cut shredder, which will make it tougher to piece together those documents and steal your identity.
3. Don't give your ID information out to people who call you: If your bank or medical institution needs to verify that you're really you over the phone by way of your Social Security number, they should offer you a call back number that you can use to reach them. And before you call back that number, verify that it really belongs to the institution by calling the office's main number (typically easily available through Google or the phone book) and asking.
4. Regularly check your credit report: You can get a free annual credit report from each of the three credit bureaus. That's a great way to see if anyone else has opened accounts or taken on debt in your name. In addition, regularly check your bank and credit card statements to see if you recognize all the charges, and notify your bank immediately if you see charges that aren't legitimate.
The reality is that while the major identity protection companies can help you through the process of getting your life back together after an identity theft, none of them offer fail-safe systems to prevent your identity from being stolen. The best you can do is to be vigilant in protecting and monitoring your identity -- either on your own or with the help of an ID protection company that no longer promises more than it can really deliver.
Motley Fool contributor Chuck Saletta has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.