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Some one in six consumers, representing almost 34 million people, say they have bought a privacy protection product to help avoid identity theft and that's fueling an unproven multi-billion dollar industry that barely existed a few years ago. Consumers are buying into a cottage industry that offers services consumers often can provide for themselves -- at little or no cost, provided they learn how to perform those tasks. It's certainly understandable, from the bottom-line perspective of running a business, that the heavily marketed identity protection industry extols the virtues of its services, without expending the same effort offering detailed, common-knowledge information that explains how consumers can do a similar job on their own. The ID-theft pro industry sector's enthusiasm at selling itself is not unlike just about any legitimate, profit-making enterprise. But there's a certain irony to this fledgling business that should raise concern. Some of the companies selling identity protection services are among those who inadvertently exacerbated the problem with security breaches in their own data security. Consumers buying protection from them are effectively footing the bill for their data protection provider's shortcomings. "We do not endorse credit monitoring services because we believe that individuals should not have to pay a fee to track their credit," says San Diego, CA-based Privacy Rights Clearing House. Data protection shortcomings spawned powerful new federal legislation that now mandates how credit information stockpilers, data compilers, corporations and individuals who use sensitive, personal information must handle and dispose of it so it doesn't wind up in the wrong hands. The legislation didn't call for fee-based data protection services. The Fair and Accurate Credit Transactions Act (FACTA), enacted Dec. 4, 2003 to amend the Fair Credit Reporting Act (FCRA) is, however, loaded with provisions designed to help consumers keep closer tabs on their credit reports and protect their personal information.

At the very least, consumers should think twice before handing over cash to an industry without a track record and subscribe only when a specific company can prove itself sound and its service viable. If a company proclaims to have the capability to save you from ID-theft, consumers have a right to ask for documented evidence to back up that claim. Just as business has a right to hawk it's wares, consumers have a right to heavily scrutinize what they get for the money.

It's called "shopping around" and no where is this more important than in the ID-theft arena. This summer, a survey financed by the Privacy & American Business found that 33.4 million Americans say they have been victims of ID-theft or fraud since 1990. Designed by Alan Westin, a professor emeritus of public law and government at Columbia University and conducted by Harris Interactive, the survey says that victims' out of pocket expense has totaled $1.5 billion a year since 2001. One in six consumers, representing almost 34 million Americans, say they have bought a privacy protection product to help avoid ID-theft, to check their credit report, and to surf or shop online anonymously. At $75, the average annual price for these products, the cost adds up to a $2.5 billion annual expenditure -- more than victims' annual out of pocket expense related to ID-theft or fraud. While some services will help consumers spot trouble in a timely manner, protect them against further incursions from the same culprit, or insure them against a limited level of out-of-pocket losses, the services don't stop the crime of ID-theft. That's because the victim of the crime often inadvertently assists the criminal. That means a large chunk of ID-theft can best be stopped by the consumer. The Harris Interactive survey found that 16 percent of victims' friends, relatives and co-workers stole their identity; 12 percent said someone stole or obtained improperly paper documents or computer records with their personal information; 11 percent said someone stole their wallet or purse; 7 percent said someone got into their mail or mail box and 5 percent said they lost their wallet or purse. The only ID-theft protection that could have stopped those incursions would have been armed guards or police officers posted at strategic locations, that or a change in the consumer's behavior to avoid becoming an ID-theft victim. "Furthermore, the diverse patterns of ID theft show that no one institution, industry, or government agency is 'to blame.' But, some information practices and procedures of key players including consumers clearly need to be improved and important new consumer-assistance laws need to be enacted," reported Privacy & American Business. Most consumer advocates say the do-it-yourself approach to ID-theft protection is the smarter, less expensive and best approach for consumers.

The nonprofit consumer education institute San Diego, CA-based Institute of Consumer Financial Education recently documented what you get and what you don't get for the money from a variety of protection services and found limited instances where the services could prove viable.

Sheila Gordon, director of victim services at the Identity Theft Resource Center in San Diego, says most people don't need to pay for expensive credit-monitoring services, but simply arrange to get a different report from each of the three credit agencies every few months, thus providing year-round free credit report monitoring coverage, as service for which theft-monitoring companies charge a fee. FACTA makes three free credit reports possible every year. One of the nation's staunchest consumer advocates, Consumer Reports in "ID-Theft Protection Services Typically Not Worth The Money" examined ID-theft insurance offered by major national insurance companies and said "Given the limited coverage, we don't recommend buying ID-theft insurance." The independent rater of consumer goods and services also examined credit-report monitoring and reported: "One instance in which you might consider buying a monitoring service is if you're already a victim of ID theft and want an early warning of new incidents. Consider, however, that even credit-monitoring services may sell data that you provide to them to affiliates, whose databases may not be secure."

The New York State Consumer Protection Board found other incidents when a sound monitoring service could be viable. "Many consumers may find these to be valuable services particularly consumers who ... are not careful with their personal information, who have little tolerance for risk, and who have many family members using the same credit cards. Consumers should understand exactly what would be provided by an ID Theft Protection Service, before subscribing," according to the board's "A Consumer Guide To Preventing Identity Theft."

You've also got to weed through a new breed of fraud and scams. The worst thing that could happen is getting your identity stolen from a company proclaiming to protect it. The Federal Trade Commission has been warning consumers that the credit "protection" industry in general is fraught with fraud and scams. Consumer Reports agrees.

"ID-theft prevention services have spawned a new scam. Telemarketers and e-mail spammers offering free credit reports ask you to fill out a form with your personal information, which they use to commit fraud against you," Consumers Union's monthly magazine reported.

Tomorrow: Tips, resources and more advice to help you protect your personal, financial and other private information without paying a dime -- except in time.

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