ID theft concerns grow, tools lacking

Free reports 'basically a farce'
Among the report's most interesting findings: only 14 percent of consumers who were aware of their right to a congressionally-mandated free credit report said the reports were very effective in the fight against ID theft.

Many consumer rights in the battle against ID theft stem from the 2003 Fair and Accurate Transaction Act, which granted consumers the right to one free annual peek at their credit report. It's the most obvious new consumer right contained in the law. In November, the three major U.S. credit bureaus, Experian, Equifax and Trans Union, launched AnnualCreditReport.com, the only Web site offering the federally-mandated free reports. Access to the reports was phased in across the country; those on the East Coast still can't get theirs until Sept. 1.

Litan's research found that 37 percent of all U.S. adults hadn't even heard of their right to a free report. Of those who had, 23 percent said the free report had little or no effect in their personal effort to prevent ID theft.

These consumers are simply being perceptive, Litan argued.

"The free credit report thing is basically a farce. It only tells you very specific information about your situation at a point in time," Litan said. Consumers on the West Coast who downloaded their free report last November aren't eligible for another year, and have had to watch the long string of data thefts with no recourse but to pay for another peek at their reports. "Everyone assumes consumers are dumb," Litan said. "They're not. They know these measures are ineffective."

Crane said the Federal Trade Commission is currently preparing a marketing campaign around free credit reports to increase consumer awareness.  She also said awareness is probably hampered by the fact that New York, Boston, and other major East Coast cities still don't have access.

'Not really a prevention tool'
Equifax spokesman David Rubinger said free credit reports were never advertised as a panacea for the identity theft problem.

"This is bearing out what Equifax has always said — free credit reports are not going to stop ID theft. They are just one tool," he said. "The good news is there are products in private sector that can protect consumers.” 

All three credit bureaus sell credit monitoring services for about $10 a month that allow daily credit report checkups.

A spokeswoman for Experian said the company couldn't comment on Litan's study. Trans Union did not return requests for comment.

Norma Garcia, a spokeswoman for Consumers Union, said the three credit bureaus may have confused consumers by offering paid services with similar names to the free report Web site.  FreeCreditReport.com, for example, is actually an advertisement for a paid subscription service sold by Experian.

"The bureaus have done a good job of capturing consumers wandering around trying to find their free credit report," she said.  "But they ... haven't done a good job of educating consumers about free credit reports."

Keri Smith, a consumer advocate with the Public Interest Research Group, said she thought the free reports were a good tool for consumers, an important first step in understanding what credit reports are and how they work. She recommended that consumers stagger their requests for free credit reports throughout the year, picking up one every four months, rather than getting all three bureau's reports at once. This would allow consumers to take a more frequent look for signs of ID theft. Consumers in some states can get three additional reports thanks to state provisions which also call for free annual credit reports.

"But the point of credit reports is not to prevent ID theft," she said.

Mari Frank, a lawyer who frequently represents ID theft victims, said she wasn't surprised that free credit reports ranked low in consumers' minds.

"They are not really a prevention tool," she said. "It just allows you to see and question whether something is either in error or fraudulent (after the fact).  It's not going to prevent ID theft."

Joel Winston, an FTC lawyer who helps oversee the free credit report provision, agreed that the reports are not a panacea, but he thought the "program is working pretty well."

"It's just one more tool consumers can use to keep an eye on things," he said.  But there are several other provisions of the Fair and Accurate Transaction (FACT) Act which are still being deployed to help consumers, such as improved fraud alerts and streamlined processes for cleaning up credit reports with erroneous entries.

The General Accountability Office, Congress' investigative arm, is currently conducting a study of the effectiveness of FACT Act anti-ID theft provisions.

But additional ID theft regulations are no guarantee for consumers, who are overwhelmed by news of data leaks, confused about their rights and feeling stranded by the government.

Beth Givens, executive director of the Privacy Right Clearinghouse, said she wasn't surprised by the consumer frustration expressed in Litan's study. She wasn't optimistic that more protection from the government would arrive any time soon. She blamed the state of the ID theft crisis on federal regulators, saying they were not enforcing rules and laws that already exist — giving companies the idea that they could get away with careless treatment of consumer data.

"The regulatory agencies have fallen flat on their faces," Givens said. "They are so industry-oriented they have lost site of who they are really supposed to be protecting."

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

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