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Selling 'insurance' after the ID theft flood

When the massive data leak at ChoicePoint Inc. became widely known last month, reactions varied: Consumers worried about identity theft. Lawmakers called for hearings. Other data brokers began looking at their own files.

Officials at the credit bureau Equifax spotted a great marketing opportunity.

Equifax is one of many companies that sell credit monitoring services, aimed at letting consumers know when there's unusual activity in their credit reports. Credit Watch, the Equifax product, costs consumers $100 a year.

Days after the ChoicePoint break-in was first reported by, Equifax sent an e-mail to its Internet marketing affiliates. They were told to quickly jump at the opportunity:

"Attention Link Partners:­ Credit Watch Sales OpportunityIdentity theft is prevalent in the news right now, especially with the high profile case of stolen consumer information. Thousands of identities may have been compromised. In order to help consumers understand this threat and how this crime can affect them, Equifax created an Identity Theft Awareness campaign that we want to share with you.  Starting on Friday 2/18 our home page began to highlight the news articles and the growing threat to consumers."

The e-mail went to say that the credit bureau planned to purchase additional Internet advertisements for about two weeks to take advantage of the sales opportunity.

Equifax confirmed that the e-mail, which was obtained by, was authentic, and was sent out in response to the ChoicePoint incident. The company said that the Internet advertising, however, was part of its normal marketing strategy and did not represent a specific increase in spending in response to ChoicePoint.

Vince Corica, head of Equifax's consumer-oriented "Personal Solutions" group, said the ChoicePoint incident and similar high-profile news items that draw attention to the problem of identity theft were natural times to market the company's credit-monitoring product.

"You sell Christmas trees in December. You sell turkeys at Thanksgiving," he said.

"The ChoicePoint incident merely accentuates that somebody has to stand between ID thieves and the consumer. We know consumers have to protect their credit around the clock, and our mission is to get that word out in as many ways as we can," Corica said.

'Profiteering at its worst'
Privacy advocates blasted Equifax for trying to profit off a problem that they believe the credit bureaus helped create.

Linda Foley, executive director of the Identity Theft Resource Center, said she thought the Equifax ad was tasteless.

"This is a profiteering at its worst," Foley said.  "They are trying to cash in on the hysteria it caused. ... Consumers beware. It is clear that at least some of corporate America considers you nothing more than a cash cow."

Gail Hillebrand, senior attorney at Consumers Union, said the credit bureaus regularly jump on identity theft news as a sales opportunity for the consumer products.

"Any time there is a (data) breach or other publicity about identity theft, we see a ramp up in advertising," she said.  "It's not surprising. We saw this at the time the free credit report was in the news. 

"But the ironic thing is the credit reporting agencies are helping to facilitate (identity theft) by not having careful and accurate files," she said. "Consumers should stay away from high-priced credit monitoring services."

Corica disagreed. "I don't understand why anyone would react negatively to someone trying to bring a solution to the consumer," he said.

Jay Foley, who co-founded the Identity Theft Resource Center with his wife, said credit bureaus are just making money off a problem they had a hand in creating. Foley, like Hillebrand, blames part of the identity theft problem on the bureaus. Often the only tangible consequence most consumers face from identity theft is the resulting black marks that end up on their credit reports.

"This ... is the clearest indication of the desire of Equifax to pick the pocket of every consumer in the United States," Foley said. "It smacks of someone creating a flood to sell inflatable rafts." 

He also said he was concerned about the prior business relationship between ChoicePoint and Equifax. ChoicePoint was once part of Equifax, but seven years ago the firm was spun off as a separate entity.

"The connection between ChoicePoint and Equifax smells of the brother of a poor quality dam builder selling everyone in the valley flood insurance," he said.

Corica said ChoicePoint and Equifax are entirely separate entities now, and the firms have no direct affiliation.

Bureaus increasingly sell to consumers
Once almost invisible to consumers, the three credit bureaus are increasingly turning to consumer products as a new revenue stream. Equifax wouldn't say how many consumers have purchased Credit Watch but did say that 8.3 million consumers have purchased at least one product from the firm's personal solutions group. Experian operates a number of Web sites that sell credit reports to consumers, such as and, which the firm paid $100 million for in 2002. In 2003 it said 1.6 million consumers had purchased products from its consumer division. Trans Union, a private company, generally does not disclose sales figures.

Trans Union said it did not increase advertising in the wake of the ChoicePoint case and other high-profile database leaks. Experian didn't immediately respond to a request for interview.

All three credit bureaus sell credit monitoring services, including regular peeks at credit reports and credit scores, and other early-warning tools. Prices range from $40 to $150.  Most major banks also offer similar products for about the same price. Such services also often come with insurance to pay costs associated with rectifying instances of identity theft, if necessary.

While a federal law passed in 2003 gives consumers the right to see one free copy of their credit report each year, the law is still being phased in, and free reports are .

Credit monitoring services are worthwhile, said James Van Dyke, an analyst with Javelin Strategy & Research, which recently completed a study of the monitoring services.

Most of the services are able to send e-mail and text message alerts to cell phones if a new credit card account is opened in a consumer's name, for example. Such "new account" fraud —as opposed to a criminal draining money from an existing account — is usually the hardest to spot and the most costly for both consumers and financial institutions.

The monitoring services probably offer the best way to quickly discover an identity theft incident, Van Dyke said.

"The alerting capability is crucial," Van Dyke said. "Most consumers just won't check their credit reports on a daily or even weekly basis." He added, however, that he thinks the services should be priced at no more than around $50 a year. 

Corica said it's important that Equifax be able to develop, sell and market products that protect consumers from identity theft.

"We are a for-profit company.  Our products have value," he said.  "We're in a new era here. The media has an important role in terms of awareness, and we have a role in terms of providing that around-the-clock protection. I am committed to standing between thieves and consumers. Let's make sure they know there's protection."

Bob Sullivan is the author of .