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Don’t get taken guarding your ID
Marketing can be deceptive. Regulators have slapped the ID-protection industry several times for deceptive marketing practices. Last summer, after actions by federal regulators, Capital One and Discover Financial Services agreed to pay a combined $410 million in refunds and penalties related to deceptive marketing of identity protection, credit monitoring, and other services. Prior to that, Affinion, Experian Consumer Direct, and LifeLock had been caught and punished for alleged deceptive marketing practices, such as not adequately disclosing automatic sign-up after “free” trials and promising to prevent ID theft, even though the services don’t actually do that.
The threat is exaggerated. Two-thirds of cases of ID theft reported to the annual National Crime Victimization Survey involve stolen credit cards, not stolen identities. Federal regulations limit your liability, usually to $50 per account, and even that is often waived by card issuers. Add stolen debit cards and check forgery, and existing-account fraud makes up 80 percent of so-called ID theft.
Do it yourself for less. Sign up for free online banking and mobile apps to monitor your checking and credit accounts daily.
New-account fraud is uncommon. The most destructive type of ID theft is having your name, birth date, and Social Security number used to open credit accounts, tap your health insurance, or file a tax return in your name to steal your refund, among other crimes. But less than 1 percent of households experienced that form of ID theft in 2010, according to the Department of Justice.
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Credit monitoring is flawed. The core of many ID-protection products is credit monitoring, which looks for fraudulent new accounts on your credit reports. But most e-mail and mobile alerts from those services raise false alarms about routine changes in your file. And if fraud is detected, you might not be “warned” until days, weeks, or months after the fact.
Do it yourself for less. Get free annual credit reports from each of the three major credit-reporting bureaus—Equifax, Experian, and TransUnion—by going to annualcreditreport.com. Stagger your requests every four months from one bureau to the next. You’re also entitled to a free credit report from each bureau after you place a 90-day fraud alert on your credit file—which you should do every 90 days if you’ve been notified of a security breach, your wallet has been stolen, or you detect other red flags of ID theft. The alerts prompt lenders to more carefully verify applicants using your ID.