The Wall Street Journal had an interesting article last week exploring the ID theft protection services banks offer to checking account customers:
Citibank, Fifth Third, Wells Fargo and BofA say their products help protect customers from identity theft by detecting problems earlier—and that being enrolled in its services means faster recovery of a stolen identity.
But consumer advocates and identity-theft experts say such services can't protect from data breaches, criminal fraud, medical identity theft or fraudulent Social Security number use—among the most common forms of identity theft.
"There's no such thing as immunity to identity theft," says David Lincicum, a staff attorney for the Federal Trade Commission's division of privacy and identity protection.
Consumers can take steps on their own for little or no cost to protect themselves from—or at least quickly detect—attempts to steal their identity. Federal law permits consumers to access credit reports for free once a year from the national credit bureaus, Equifax, Experian and TransUnion, and some states mandate more frequent access.
As the WSJ points out, most of what these services can do can be accomplished in a few minutes using annualcreditreport.com to pull a copy of your credit report every few months. That's why this stat from the WSJ article really blew me away:
For consumers who entrust their daily financial lives to their bank already, a pitch to protect their identity can be powerful. At Fifth Third, which has 2.5 million checking-account customers, nearly a third of its new customers enroll in the bank's Identity Alert service for up to $9.95 a month within the first 90 days of opening an account, says a bank spokesman.
I'm not saying ID theft isn't a big problem. From 2000 to 2009, the FTC received over 2 million complaints of ID theft from consumers. But even if all 2 million people who reported a crime were actually victimized by ID theft, that still leaves over 300 million Americans who weren't.
I think this gives us a clue to these services' popularity: Because, if you do the math with the numbers above, less than 1 percent of Americans are affected by ID theft, the vast majority of people who purchase ID theft protection presumably don't get their ID stolen. To them, the fee they paid for ID protection was money well spent, because they didn't have their ID stolen.
In that spirit, I'm starting a similar product called the Claes Bell Nuclear Attack Prevention Service. For just $9.95 a month, I'll monitor international news and diplomatic chatter released from Wikileaks to prevent you from being the victim of a nuclear attack. Of course, the service I'll be offering will be worthless, but as long as there's no nuclear attack, all my customers will think I am providing a great value -- imagine, only $10 a month to prevent nuclear annihilation! Of course, in the event of a nuclear war, I'll be happy to cancel service for unhappy customers, but I'll have already collected a bunch of money for essentially doing nothing. Slogan: "Don't lose sleep over nuclear risks, take NAPS instead!"
What do you think? Are ID theft prevention services a good deal? Are you paying for such a service right now?