Thursday, May 28, 2009

Fraud Alert Services are Illegal

A federal judge last week decided that LifeLock's fraud monitoring practices violate California law, reports Wired. The identity-theft protection company was sued last year by one of the nation's three credit reporting bureaus for violating California's Unfair Competition Law. For a fee, LifeLock places fraud alerts on consumers' credit reports on their behalf. U.S. District Judge Andrew Guilford determined that the lawmakers writing the 2003 Fair and Accurate Credit Transactions Act (FACTA), which gave consumers the right to place free fraud alerts on their credit reports, did not intend for "companies and entities such as credit repair clinics," to be able to place the alerts. Full Story

I have been making this point now for several years. Fraud alert services are bogus attempts to get into a growing "industry". An industry in the most rare definition of the word that produces precious little but declares quite a lot. They simply took advantage of the rights we have under the FCRA, culled out one paragraph from that act and opened shop. This paragraph proposes that any entity that issues credit accounts must contact the individual or his/her designate prior to opening a new account if a fraud alert has been placed with the credit bureaus. The fact of the matter is that most creditors do not follow that practice. Add to that the irrefutable fact that credit related identity theft is less than 1/3rd of all identity theft and you are left with a highly ineffective service that in my opinion gives the public a false impression of identity theft and a false sense of confidence in the product to protect them. This is not about Experian nor any other entity this is about the truth. These companies will cook any statistic they can to assert their claims that they have effective services when in most professionals' opinion they offer little to no advantage for the client that the client cannot do for themselves at no cost.

Look at any other field such as law enforcement, medicine, engineering, and so on. Who are the people that own or manage the organizations? Are they marketing people or venture capitalists? No, they are professionals with experience in their field. When we began our Identity Theft Shield in 2003 those of us who were already seasoned fraud risk and privacy rights experts predicted that as the crime grew that opportunists would come along and try to take advantage of the increase in identity theft. And we also knew that they would be shaken out if their services did not offer true assistance and expertise.

The Internet is full of comparisons between the various services. You will almost always note one glaring exception, the Identity Theft Shield from Pre-Paid Legal and Kroll Fraud Solutions. There is only one reason for this omission, well two reasons. First we don't pay for comparisons, and secondly and most importantly, you cannot compare a professional service to these others that do either nothing to very little on behalf of the client but charge handsomely for the product. All of the above is of course my considered opinion.

As one very well respected identity theft expert once put it to me. "It's hard being right......early."

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