Money for Nothing

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When any of these services are offered by your bank or credit union for free, they're worth it. Bank of America, for example, offers a free service for its customers if they become a victim of identity theft involving Bank of America accounts.

There's no question that most, if not all, of the companies exploit Americans' fear of identity theft to sell their service. They compare identity theft to a calamity such as a house fire. They play up crime figures reported by the Federal Trade Commission and other sources, which state that millions of Americans will become victims every year. And the news media help drive the mania with reports of the most extreme examples.

People give each other paper shredders for Christmas. They scan their bank account and credit card statements for false charges. If the anti-identity-theft companies are to be believed, tens of thousands of people have signed up for services that claim to protect people.

The reality is that the crime isn't nearly as terrible as the identity-protection firms try to scare you into believing.

More than half the cases involve fraudulent credit card charges that are quickly reversed by credit card companies. Even in cases in which thieves open credit accounts in other people's names, the victims usually pay no out-of-pocket costs.

Ironically, the people most likely to buy the services are those least likely to need them. According to LifeLock's literature, most of their customers are 35 to 50, well off, and "not the most susceptible to identity theft."

Police say the hardest hit are young people in their 20s or people of modest means. One California victim described how, after a thief withdrew the $2,000 in her checking account, she was forced to ask her employer for a loan because a bank took two weeks to put the money back.

Believe it or not, even shredding — that staple of identity protection — isn't necessary for many of us, especially if you live in a house with individual garbage collection rather than share a trash bin with neighbors.

Al Shiya, a spokesman for Phoenix's public works department, says that once a garbage truck picks up a trash barrel, there is "zero risk" of identity theft from pilfered garbage. Green-barrel garbage is compressed, put in a pit and covered by dirt in the city's Buckeye landfill the same day it's picked up or the next day. Nobody scavenges at the landfill, which sits on thousands of acres and is surrounded by a high, chain-link fence. Blue-barrel recycling garbage is sorted at a secure facility.

"There have been no incidents in anyone's memory here where anyone's identity was compromised within this process," he says.

Expert Bob Hartle believes none of the ID-protection services — except the ones you can get for free — has any real value. He doesn't trust them, either.

Anyone considering such a service should read the fine print, he says. Many companies require you to give them power of attorney, which Hartle says could be misused. He points out that while some companies say they do criminal background checks on their employees, you won't know if they really do.

The monitoring and relief services help you only after theft has occurred, so you're paying month after month for something you don't normally need. If you do get zapped, it's no big deal to get the problem fixed, he says.

True, the services might sound appealing if you're lazy and have money to burn, but Hartle insists you won't get anything you can't do yourself in very little time.

Most people don't really need a fraud alert on their credit reports. Unless you've published your Social Security number — like LifeLock CEO Todd Davis did — or somebody hacks into your employer's human-resources computer, placing a fraud alert isn't worth the bother.

A fraud alert probably won't prevent crime, as the Davis example shows. A lender may not call a major credit bureau, which means an alert won't be found, or a lender may see an alert but choose not to call its customer.

An alert also may stop you from taking advantage of a good credit offer. If your contact number for a fraud alert is your mobile phone, you'd better have the phone in your purse or pocket before you try to open a new credit account or you'll be stuck.

But some experts recommend fraud alerts as a simple precaution. Most times, an alert should prevent the type of identity theft in which criminals open accounts under your name.

The right to place a fraud alert on your credit report is relatively new, provided courtesy of Congress via the Fair and Accurate Credit Transactions Act of 2003, also known as the FACT Act. The main problem for consumers is that the law allows the credit bureaus to lift the fraud alert after 90 days, making it easier for their customers — lenders — to do business. If you want permanent protection, you need to renew the alerts every three months.

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Ray Stern has worked as a newspaper reporter in Arizona for more than two decades. He's won numerous awards for his reporting, including the Arizona Press Club's Don Bolles Award for Investigative Journalism.