Making Money on ID Theft
Eric Dash of the New York Times reports that criminals are not the only ones profiting from identity theft; financial institutions take a cut, too. Fear of identity theft has created a billion-dollar business in credit-monitoring services sold by the major credit bureaus — companies like Equifax, Experian and TransUnion — as well as direct marketers and banks.
Dash tells the story of Melody Millett, a woman whose car loan company asked her if she was the wife of Abundio Perez, a man she had never heard of but who had applied for 26 credit cards, financed several cars, and taken out a home mortgage using a Social Security number belonging to her real husband.
Millett was shocked and angry, as she and her husband had subscribed to a $79.99-a-year service from Equifax, a financial data warehouse, five months earlier. Equifax was supposed to be monitoring access to her credit records. However, it never reported the credit activity that revealed that they were victims of identity theft.
Javelin Strategy and Research reports that more than 12 million Americans are now subscribers to such services, which are supposed to alert them when any activity takes place on their credit files. However, these services are more limited than subscribers believe.
Interestingly, measures that could help prevent identity theft — like legislation allowing consumers to block access to their credit records— are resisted by industry groups. Many believe that this is because the biggest beneficiaries from identity theft are financial data institutions and three credit bureaus.
“Identity theft has essentially become a business — not just for bad guys but for good guys, too,†said Robert Gellman, a privacy consultant in Washington. “A lot of the people that are involved in profiting legally from identity theft are direct participants in the whole credit system that doesn’t have the protections in place to prevent identity theft in the first place.â€
The three credit bureaus hold a vast amount of personal and financial data, which they sell to lenders and individuals. While the data is sold to a large financial institution for 20 cents to $1 a report, according to analysts and industry executives, it can be repackaged and sold to consumers as credit monitoring for $3 to $16 a month.
Financial and retailing lobbying groups generally oppose credit freeze legislation at the state and federal levels since it could delay retailers and banks from issuing credit to a legitimate customer, who must first unfreeze the credit file. However, it could also slow down business for the bureaus that sell consumer credit files.
