Selling 'insurance' after the ID theft flood

Jay Foley, who co-founded the Identity Theft Resource Center with his wife, said credit bureaus are just making money off a problem they had a hand in creating. Foley, like Hillebrand, blames part of the identity theft problem on the bureaus. Often the only tangible consequence most consumers face from identity theft is the resulting black marks that end up on their credit reports.

"This ... is the clearest indication of the desire of Equifax to pick the pocket of every consumer in the United States," Foley said. "It smacks of someone creating a flood to sell inflatable rafts." 

He also said he was concerned about the prior business relationship between ChoicePoint and Equifax. ChoicePoint was once part of Equifax, but seven years ago the firm was spun off as a separate entity.

"The connection between ChoicePoint and Equifax smells of the brother of a poor quality dam builder selling everyone in the valley flood insurance," he said.

Corica said ChoicePoint and Equifax are entirely separate entities now, and the firms have no direct affiliation.

Bureaus increasingly sell to consumers

Interactive Identity theft What to do when it happens

Once almost invisible to consumers, the three credit bureaus are increasingly turning to consumer products as a new revenue stream. Equifax wouldn't say how many consumers have purchased Credit Watch but did say that 8.3 million consumers have purchased at least one product from the firm's personal solutions group. Experian operates a number of Web sites that sell credit reports to consumers, such as FreeCreditReport.com and ConsumerInfo.com, which the firm paid $100 million for in 2002. In 2003 it said 1.6 million consumers had purchased products from its consumer division. Trans Union, a private company, generally does not disclose sales figures.

Trans Union said it did not increase advertising in the wake of the ChoicePoint case and other high-profile database leaks. Experian didn't immediately respond to a request for interview.

All three credit bureaus sell credit monitoring services, including regular peeks at credit reports and credit scores, and other early-warning tools. Prices range from $40 to $150.  Most major banks also offer similar products for about the same price. Such services also often come with insurance to pay costs associated with rectifying instances of identity theft, if necessary.

While a federal law passed in 2003 gives consumers the right to see one free copy of their credit report each year, the law is still being phased in, and free reports are available in only half the country currently.

Credit monitoring services are worthwhile, said James Van Dyke, an analyst with Javelin Strategy & Research, which recently completed a study of the monitoring services.

Most of the services are able to send e-mail and text message alerts to cell phones if a new credit card account is opened in a consumer's name, for example. Such "new account" fraud —as opposed to a criminal draining money from an existing account — is usually the hardest to spot and the most costly for both consumers and financial institutions.

The monitoring services probably offer the best way to quickly discover an identity theft incident, Van Dyke said.

"The alerting capability is crucial," Van Dyke said. "Most consumers just won't check their credit reports on a daily or even weekly basis." He added, however, that he thinks the services should be priced at no more than around $50 a year. 

Corica said it's important that Equifax be able to develop, sell and market products that protect consumers from identity theft.

"We are a for-profit company.  Our products have value," he said.  "We're in a new era here. The media has an important role in terms of awareness, and we have a role in terms of providing that around-the-clock protection. I am committed to standing between thieves and consumers. Let's make sure they know there's protection."

Bob Sullivan is the author of Your Evil Twin: Behind the Identity Theft Epidemic.

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