MY first Shortcuts column, almost seven years ago, was on identity theft. At that point, in 2005, it seemed to be a scary and ever-growing trend, with tales everywhere of stolen credit cards and Social Security numbers leading to bad credit ratings that could haunt you for years, potentially costing you car loans, mortgages and even jobs.
Spurred by a Consumers Union report this month that argues that identity theft is being hyped by marketers to scare consumers into buying costly and unnecessary services, I decided I wanted to revisit the issue.
Is identity theft going up or down? What can we do to protect ourselves? And is it worth it to buy protection?
First of all, the numbers. According to Justice Department figures released last November, in about 8.6 million households at least one person 12 or older experienced some kind of identity theft in 2010. That’s up from 6.4 million households in 2005, when I first wrote about it.
So it’s still a problem, and an expensive one. The Justice Department wrote that identity theft cost households a total of $13.3 billion in 2010 in direct financial losses.
That sounds pretty serious. So why is Consumers Union telling people not to worry?
“We tell people they should take the problem seriously, but don’t panic,” said Jeff Blyskal, senior editor at Consumer Reports, who has been investigating issues surrounding identity theft for years and wrote the recent article.
If you look more closely at the figures, the Justice Department states that the unauthorized use of existing credit cards “accounted for much of the increase in household identity theft from 2005-2010.”
And the percentage of households experiencing “the misuse of personal information to open a new account or commit another crime” declined to 14 percent from 23 percent in the period.
Over all, 24 percent of households that experienced identity theft suffered no direct financial loss in 2010, compared with 19 percent in 2005.
So we’re doing well, right?
Well, not so fast.
It’s true that the most common type of credit card fraud is pretty easy to deal with. Most people are liable for up to a maximum of $50 if someone fraudulently charges items using their number. This recently happened to us. We were notified of suspicious activity on the card, confirmed we hadn’t recently charged anything in Nordstrom’s in New Jersey (somewhat classy criminals) and were sent a new card fairly quickly. It was painless.
A word of warning, though. A stolen debit card number is much less simple. If you don’t notify the bank right away, “you’re liable to be responsible for a lot more than $50,” said Phil Blank, managing director of security, risk and fraud at Javelin Strategy and Research.
And there are other kinds of identity theft that can create many more problems than the credit card type. Although less prevalent, these include criminal identity theft, where someone who is arrested for a crime uses your information, and suddenly you have a warrant out for your arrest; medical identity theft, where someone accesses your medical insurance and misuses it; tax identity theft, where your tax records, and refund, are misappropriated; and child identity theft, in which someone uses a child’s Social Security number to commit fraud.
In cases like these, if the bad information gets on a credit report or impinges on another part of your life, it can take many hours — and sometimes a fair amount of money — to clean up.
“It’s not just the numbers taken out of your account,” Mr. Blank said.
So what’s a consumer to do? Sign up for one of the myriad companies that promise to protect and defend you, often for around $10 a month and up?
Let’s consider that for a moment.
First, there are plenty of free services that will help protect you, or at least sound an alert, if something’s going wrong with your accounts.
When I last wrote about this in 2005, only five states allowed consumers to freeze their credit reports. If you do that and someone tries to open a credit card in your name or take out a car loan, the credit will be denied because the vendor can’t access your credit report. Now, almost every state allows you to freeze (and unfreeze) your credit report, some free and some for a minimal fee.
Banks are also offering far more services that alert you to potentially criminal activity. For example, Mr. Blank said his bank alerted him every time a “card not present” purchase was made — that is when his card number was used to buy something online or over the phone.
“Most people don’t know what alerts are,” he said. “All sorts of alerts can empower the consumer.”
Here are some of the situations that some banks and credit card companies offer to alert to you, by e-mail or text message, usually without charge:
¶ When there is a withdrawal of cash from an A.T.M.
¶ When a charge is entered for more than an amount that you stipulate, like $100.
¶ When there is a change in the phone number or other information on your account.
Currently, though, most alerts let you know after the fraud has occurred.
“The new technology that we’re seeing coming out will alert you when someone is trying to charge $1,000 on that credit card,” Mr. Blank said. “You can say right away, yes or no, if you approve.”
Here are other things you can do to protect yourself: Check your credit reports free once a year. If you stagger it, you can receive a free report once every four months from one of the three major credit reporting companies — TransUnion, Equifax and Experian.
For medical fraud, check in with your medical insurer to see if there are any claims you don’t recognize. LexisNexis Full File Disclosure (Go to personalreports.lexisnexis.com and click on “access your personal information”) offers, among other things, a public records search, reports on claims for auto and homeowners’ insurance and pre-employment background checks.
And, still true after all these years: shred all documents that have any bank, Social Security, credit card or insurance identification numbers.
But what if you want more? Surely there’s no problem paying for some added protection?
That’s where opinions divide.
For Mr. Blyskal of Consumers Union, it’s better to be an informed and active consumer than to buy these services. It’s necessary to really dig into the fine print to see what protection is truly being offered, he said. Over all, identity theft protection companies “can give you a false sense of security,” he said.
On the other hand, Matthew Davis, a victim adviser at the nonprofit Identity Theft Resource Center, said that “you have to be a proactive consumer, but I would disagree that no products are helpful.”
Mr. Davis wouldn’t recommend any particular companies, but said word of any poor service would trickle out quickly on the Internet through customer reviews.
Just as important as fraud alerts, Mr. Blank said, is that the companies “have people extremely experienced who handle this information.” That, he said, “allows consumers to reduce the time around the fraud once it occurs.”
Mr. Blank’s company offers some tips if you decide to hire someone: know what protection is actually provided and what is hype. And use paid services in addition to the free security options your bank already has in place, not instead of them.
The bad news is that even if we want to pay someone to defend us against identity theft, we still need to do most of the work ourselves. The good news is that seven years after I first wrote about this topic, there are a lot more free and easy ways to protect ourselves.
By Alina Tugend, New York Times, Feb. 10, 2012