The Biggest Identity Theft Scam...?

Category: Finance

Lifelock, the publicly-traded “identity-theft protection” service, is in trouble with the Federal Trade Commission again. Read on to learn why, how it might affect you, and ten free steps YOU can take to protect your identity...

Does Lifelock Really Protect Your Identity?

The FTC filed a complaint against Lifelock in U.S. District Court on July 21, alleging that Lifelock has failed to live up to the terms of a 2010 settlement by continuing to make deceptive claims about its services, and failing to protect its customers data.

Todd Davis, Lifelock’s CEO, is famous for publishing his Social Security Number on billboards as proof of faith in his company’s ID protection services, daring crooks to “Steal My Identity!” Well, they did – at least 13 times! That snafu put a huge damper on consumer purchases of ID theft services, which is probably the best thing that Lifelock has ever done for consumers.

Some 50 million Americans spent $3.5 billion on ID theft protection services in 2010. As consumers wised up and stopped wasting up to $300 per year, ID theft “protection” firms switched to peddling their services to corporations and institutions that suffered data breaches.

Lifelock and Identity Theft Scams

Target, the federal Office of Personnel Management, and hundreds of other entities that have failed to protect personal data now offer a complimentary year’s worth of ID theft protection services to victims. In my opinion, it’s just a PR Band-Aid, not real protection.

Lifelock is not the only bad actor in the ID theft-protection industry. Capital One and Discover Financial Services paid a combined $410 million in refunds and penalties related to deceptive marketing of identity protection, credit monitoring, and other services. Affinion, Experian Consumer Direct, and LifeLock were punished for not adequately disclosing automatic charges after “free” trials and for promising to prevent ID theft, which none of these services can do.

What's the Problem With LifeLock?

DID YOU KNOW…? You can get FREE credit reports three times annually? See my article Get Your Free Credit Report Online for details. SEE ALSO... my article 10 TIPS: Identity Theft Protection for ten practical steps you can take on your own, including fraud alerts and credit freezes.

Consumer Reports did a devastating job of debunking the illusory protection that firms like Lifelock offer back in 2013. In summary,

  • ID theft-protection only monitors your credit reports, and often skimps by monitoring just one of the three credit reporting agencies. Even if a suspicious application for credit is found, it may be weeks or months before you are notified.
  • Offers of up to $1 million of insurance against ID theft losses are illusory. That coverage doesn’t kick in until you have exhausted all consumer protections that banks and merchants must provide by law, your homeowner’s or renter’s insurance, and all other remedies available to you. What’s left to cover?
  • “Web scans” of black-market forums where stolen ID info is traded are useless. The thieves already have your data, so what’s the point of knowing it’s somewhere on “the dark Web?” Lifelock even says on their home page that their protection "does not cover all transactions" and that "No one can prevent all identity theft."

You can monitor your own financial accounts for suspicious activity for free, and spot unauthorized transactions a lot faster than third-party firms can. Your bank may already be doing this for you. Several times in the recent past, I've been alerted by my bank about potentially suspicious transactions. Most were okay, but a couple of them were bogus, and the bank removed those charges.

“Identity” protection is a misnomer; all these services do is monitor your credit. If your Social Security Number and other personal data are used to impersonate you for other purposes, Lifelock and its ilk will never know. Medical insurance fraud, tax fraud, and even felonies committed by people posing as you are not covered by “identity protection” services.

Enrolling in one of these services may actually increase your vulnerability to ID theft. The FTC is alleging in its complaint that Lifelock has failed (after five years!) to implement industry-standard security practices to protect the sensitive data that it collects from subscribers. It’s unlikely that Lifelock’s competitors do much better to protect customers’ data.

So, if you receive notice of a data breach along with an offer of free ID-theft “protection,” my advice is to turn it down. Do your own monitoring and be pro-active. The steps I've outlined above (see the sidebar) are free, and will put you in charge of protecting your own privacy.

Your thoughts on this topic are welcome. Post your comment or question below...

 
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Most recent comments on "The Biggest Identity Theft Scam...?"

(See all 28 comments for this article.)

Posted by:

Sandra M
24 Jul 2015

Very timely information in light of the OPM data breach. Thank you.


Posted by:

Gene
24 Jul 2015

Bob - I protect my assets using a three tier defense system.

First is my external asset - a great credit score. To defend my credit, I have frozen my credit record at Experian, Equifax and TransUnion. Doing so thwarts identity thieves who attempt to establish new credit lines in my name(ie - identity thieves). I have also frozen my wife's credit, at the same 3 agencies, for the same reason. The cost is negligible, the freeze is easily removed when applying for a new card, and IT security professionals at the respective agencies are guarding our credit from identity thieves.

Secondly, is to defend my existing credit line which encompasses credit cards in my wallet, existing bank accounts & current brokerage accounts. These can only be protected by routinely monitoring them for inconsistencies as you have said. It can be a daunting task unless you use software.

I monitor my credit cards, bank and brokerage history using Quicken. This software effortlessly downloads individual transactions & populates my respective registers. A quick glance at each register tells me I'm OK. The additional benefit is that I see what the size of my upcoming credit card bill will be. I can then budget accordingly. It all seems to work as I have an 812 FICO score.

Thirdly, I protect my credit by keeping bad guys out of my computer where data & passwords reside. These are the "keys to the kingdom". Bad guys can go anywhere with "the keys". Keeping my PC up-to-date with patches, regular malware/virus scans, locking down my router, doing encrypted backups comprise a personal security regimen which protects my credit.

So far, so good, no breeches. I remain vigilant because it is the wild west out there.


Posted by:

Harry
24 Jul 2015

Remember "The Net" starring Sandra Bullock? The first time I saw a Lifelock commercial that's what I thought of.


Posted by:

Joan
24 Jul 2015

Your timing on this article is amazing. I received a notice in the mail yesterday from "Medical Informatics Engineering" telling me there'd been a data breach in which my SSN, birthdate, etc. had been exposed. By way of apology, they were offering a free membership in Experian's "ProtectMyID Elite" services.

So is this just a scare tactic being used to promote Experian's service? Since the amount of verbiage spent on the ID protection service is far greater than that describing the alleged breach, I suspect so!


Posted by:

Byron M
24 Jul 2015

Years ago when I studied the installation of alarm systems and locks, the program also included info on ID theft protection. The conclusion was that no security or lock system and no ID is 100% theft proof. It also added that locks and security systems, although a deterrent to criminals, are a false sense of security for consumers/businesses. As a multi-millionaire businessman told me one time: "Good advertising can sell just about anything."


Posted by:

Butch
24 Jul 2015

To get your free credit report from one of the 3 reporting agencies, look at the date when you last requested one from Experian, Equifax, or Transunion. A full year (12 months) has to pass before you can get another free report from that particular reporting agency. I requested a report from Experian yesterday only to be told I'd already received it. A year has not yet passed so I have to wait until next month to get a new one from Experian. Twelve months, folks.


Posted by:

Robert Kemper
24 Jul 2015

Excellent and very thorough article, thanks for producing.


Posted by:

TM
24 Jul 2015

I have always been skeptical about how LifeLock works. This is really great information. Thank you!.


Posted by:

Robert A
24 Jul 2015

Bob, thanks for this important information. I am positive we would never get this truthful info from certain other Internet computer columnists, one, of which, has Lifelock as a oft-promoted sponsor.


Posted by:

Carole
24 Jul 2015

I worked in the credit card industry & frauds for years. When I listen to these Life Lock ads on TV, they make me laugh. I've had my credit card number stolen a number of times in excess of $35,000. The first time it happened, my husband freaked. I told him, don't worry, I'll take care of it. One time we were staying in a hotel and this woman stole our number and went on a spending spree. I tracked her down and filed a police report. Most people do worry, because they don't know what to do. Putting a block on your credit is a great idea.


Posted by:

Rocky Perkins
24 Jul 2015

Fun reading ! Yes, I believe no one is safe (not paranoid, just realistic). My wife is ex-Fed employee, and we received notice that all Fed e-pay has been hacked and we are at risk for identity theft--but wait, they are providing "free" monitoring of our data for 18 months. I feel soooo secure and reassured!!


Posted by:

Chris Calabria
24 Jul 2015

Thanks Bob; How long before we see the "mark of the beast", that will solve this ever growing problem?
:)


Posted by:

Ginger Johnson
24 Jul 2015

Here is a resource to help educate you about Identity Theft, learn from the best, and the #1 Risk Management Company in the WORLD - KROLL. www.kroll.com/ls

Here is why:

Kroll is the leading global provider of risk solutions. For more than 40 years, Kroll has helped clients make confident risk management decisions about people, assets, operations, and security through a wide range of investigations, cyber security, due diligence and compliance, physical and operational security, and data and information management services. Headquartered in New York with more than 50 offices across nearly 30 countries, Kroll has a multidisciplinary team of over 2,000 employees and serves a global clientele of law firms, financial institutions, corporations, non-profit institutions, government agencies, and individuals.

Still want to learn more:
www.gingermcnamara.legalshieldassociate.com


Posted by:

LadyLiberTEA
24 Jul 2015

Some States FREE for SENIORS to FREEZE SSN (& otherwise, minimal) temporary or long-term easily lifted with pin for merchant or a global lift.

As Bob says, always risky giving personal info, but if you already use free online Credit Karma or our paid AAA-sponsored ID Protect at Experian, timely emails are sent re monthly activity on SSN/Credit Bureau/ID, & our paid service likely won't renew after Bob's article has been our user-friendly starting place/central liaison with the 3 bureaus/learning curve after pc hijacked by trojan despite good security & housekeeping, thankfully Vanguard fund prevented attempted hack, and yes our Citizens Bank attempts good security too.


Posted by:

Steve
25 Jul 2015

Great information, Bob.
I had considered Lifelock at one time, and e mailed to them a specific question about coverage. What I got back was their legal agreement with pages and pages of mice type. If they couldn't (or wouldn't) directly answer a simple direct question, I dismissed them. The $1,000,000 promise is deceptive, as you stated.


Posted by:

Marc
26 Jul 2015

Great article and just in time for me since I was involved in the OPM data breach. They are offering free credit reporting through CSID which is a company I never heard of. In fact, CSID was hired by OPM to notify affected federal employees of the breach. I have elected not to use the free services from CSID but I'm wondering how safe my information is that was given to them by OPM. It sounds like a lot of these ID Theft protections services don't protect the sensitive information they have on customers and prospective customers who were involved in a data breach from theft from ID thieves. I Know that CSID has at least my name and social security number and possibly other data and I don't want to have my information stolen again.


Posted by:

Robert Knox
17 Aug 2015

Identity theft is a frightening and confusing prospect for most people. But never, never, NEVER pay for identity theft protection! There’s a proactive, do-it-yourself identity protection solution, and it's available to anybody for free. This inexpensive guide tells you how to do it: http://IdentityProtectionForFree.com

EDITOR'S NOTE: I'd take that one step further. Never, never, NEVER pay for a book on identity theft protection! My article "10 TIPS: Identify Theft Protection" is free and tells you how to do it yourself.

See http://askbobrankin.com/10_tips_identity_theft_protection.html


Posted by:

Robert Knox
17 Aug 2015

Bob: I think your Editor's Note is a pretty funny response to my previous comment. Touche! But what I'm offering to consumers at IdentityProtectionForFree.com has been appealing enough to result in hundreds of sales of my guide so far (about two months into its launch).
There's a whole lot of confusion in our country about what identity theft is and what can and should be done about it. You and I know that LifeLock et al are largely scams (since these services lost the ability to place fraud alerts on behalf of customers beginning in 2009). It's really pretty flabbergasting to me that these services have survived and even thrived for so long, particularly with the most recent FTC comeuppance that LifeLock is dealing with. Sadly, it seems that a great portion of our country's population is simpleminded and easily led by media personalities like Rush Limbaugh, Kim Komando and other well-compensated LifeLock shills. I believe that the guide that I'm selling is a great value, and I've gotten a lot of positive feedback from customers about it. I also think that your "10 Tips" is a meaningful piece. But it really just skims the surface, with statements like: "Consider placing Fraud Alerts with the major credit bureaus, so new accounts cannot be opened without your knowledge. Call Equifax (800-525-6285), and they will pass along the request to both Experian and Trans Union..." I believe that most of the aforementioned simpleminded populace wants and needs a bit more detail than that! At any rate, it's been a pleasure making your "acquaintance" via this comment thread.


Posted by:

Robert Knox
18 Aug 2015

We just bought you a cup of coffee, Bob. [http://buybobasnickers.com/]. I'm glad I found your site yesterday. It's been a valuable resource to me already, and I'm sure I'll get a lot of value out of it in the future.
Best regards,
-Chris & Martha
Mystic, Connecticut
(As you may have surmised, "Robert Knox" is my nom de plume when commenting online...in honor of my first guitar teacher.)


Posted by:

Martin
25 Aug 2015

Bob, It seems to me that the simplist, most important, least expensive step anyone can take, as I have, is to contact each of the 3 major credit bureaus (by phone or internet) and "lock" your file. This can cost about $5.00 each. It means no one can check your credit (or successfully apply for credit impersonating you). The disadvantage is that if you want to apply for new credit, or a mortgage, other loan type, etc., you are burdened with going through a temporary unlock procedure with each of the 3 bureaus. But I think this is worth the protection this affords.
In addition, I am paying IdentityGuard.Com about $12 a month for monitoring. They do not claim to prevent identity theft. I like their alerts system. They notify me of any postings to my file at any of the 3 majors. They give me access to my file at all 3 at any time. And they give me my current credit rating by all three, at all times. This service may cost more for new users. I've been with them a few years.

What do you think about both of these tips?

Regards,
Martin


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