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TrustedID: New Data Protection Or Just More of the Same?

By Martin H. Bosworth
ConsumerAffairs.com

March 21, 2006

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The announcement that the big players in the credit market -- Experian, Equifax, and Trans Union -- were introducing their own multi-agency credit score was a new front in the ongoing tug-of-war between business and consumers over credit information.

Consumers want easy access to their credit information, accurate reports, and the ability to freeze or protect their credit against identity theft. The financial services industry wants all these things as well -- but not as much as they want to make credit instantly obtainable, and thus profitable.

This inherent conflict leads to things like grossly inaccurate credit reports, credit cards issued to identity thieves, and paying for expensive "credit monitoring" after the barn door is found to have been left open.

Enter TrustedID, a new credit-monitoring company that claims to provide "the only complete solution for protecting your identity."

According to company co-founder Scott Mitic, TrustedID is designed to help "proactively prevent identity theft," rather than follow the typical approach of offering protection for consumers after their data has been stolen.

But what does TrustedID do that other credit protections don't? Is it genuine means to protect consumers' information or just another quick-buck scheme?

"The Gold Standard"

Mitic was formerly a vice president at Fair Isaac, creators of the FICO lending score that so many businesses use to gauge a customer's creditworthiness. In an interview with ConsumerAffairs.com, Mitic said that he got tired of watching the credit bureaus place greater importance on selling consumers' data than protecting it.

"[The credit bureaus] are in the business of selling your data," he said. "Consumer information is the gold standard, and we wanted to put the power back into consumers' hands."

TrustedID offers a suite of services to subscribers.

Its "IDFreeze" product includes a "Lender DoubleCheck" that prevents lenders from offering new credit to the user unless they verify the user's identity via phone or e-mail.

IDFreeze also offers subscribers the ability to lock their credit down and prevent new accounts from being opened in the user's name. "ID Freeze" would cost subscribers $7.95 a month after a 30-day free trial.

As only a dozen states have passed laws enabling consumers to lock their credit reports, Mitic admitted that the IDFreeze "credit lock" would "work differently" in states where credit locks are not honored.

Many of the other services TrustedID offers -- credit monitoring, identity theft insurance, and the "opt-out" program -- are already offered for free or as part of services from the major credit bureaus.

Mitic said that the advantage of TrustedID is that it enables the user to cover all the different bureaus at once, and let TrustedID do all the work for them.

"You need to put ten fraud flags out there every ninety days" whenever a consumer suspects their identity data has been compromised, he said.

Critics of the TrustedID program point out that anyone can get their credit reports for free from all three bureaus now, thanks to amendments to the Fair Credit Reporting Act (FCRA), and that the bureaus offer credit monitoring for victims of identity theft already, usually for free or minimal cost.

The Experian credit bureau recently introduced its "TripleAlert" service, which purports to provide regular daily monitoring of credit reports from all three bureaus for $4.95 a month.

To Mitic, the key is operating proactively. "Preventing theft after it occurs makes no sense," he said.

"Obstructing Protection"

Mitic and his partner, former Napster vice-president Omar Ahmad, are pulling no punches when it comes to the credit bureaus. Mitic accuses them of "looking myopically" at the identity theft issue, and letting their desire for profit trump their responsibility to consumers.

In an interview with Newsweek, Ahmad said that he'd rather do business with Tony Soprano than the credit bureaus. "At least you'd have a nice Italian meal and get something done."

"Equifax made $806 million off data sales [in 2005]," Mitic said. "They're obstructing efforts towards protection, and doing a disservice to consumers."

As Congress continues to push several competing bills dealing with identity theft, TrustedID is wading into the legislative fray.

The company has hired a lobbyist to push for federal laws granting consumers in all 50 states the right to a credit freeze, and to prevent federal legislation from gutting state laws against identity theft.

One bill, H.R. 3997, or the "Financial Data Protection Act," is considered so weak in terms of standards for identity theft notification and prevention that critics have called it "the worst data bill ever."

Mitic said that bills like H.R. 3997 prove that, "Congress is unduly influenced by four special interest groups -- the credit agencies, auto dealers, the mortgage industry, and the financial services industry."

"They're looking at identity theft from a position of ignorance," he said. Available technology would enable customers to lock and unlock their credit at a moment's notice, but industry is too afraid of losing profit from "weekend car shoppers" to consider the opportunity.

Trust, But Verify

Although TrustedID has already won praise in the press in the first few weeks of "IDFreeze" being released, not everyone is convinced Mitic and Ahmad's product is the ultimate solution to identity theft.

A glowing review of IDFreeze by blogger Michael Arrington unleashed a wave of criticism surrounding TrustedID's lack of transparency.

"[In] examing the website," one writer noted, "no names of principals are listed, no address is listed for the company, [and there is] no description of this company's own internal security policies. Please explain why we should be confident that this company will itself be safe for the average user."

Others are concerned about the repercussions of letting any company have the level of access to personal information that TrustedID would demand.

Tom Fragala, founder of identity theft prevention company Truston, expressed concern over the security of the data being given to TrustedID.

"In order to get this service, you have to hand over your entire life to TrustedID (your name, SSN, accounts numbers, etc) for all this to work," he said. "This is the dirty secret behind all the fanfare."

"How secure is their network, servers and database? Have their employees had criminal and financial background checks? Did the employees agree in writing to allow ongoing background checks, too? This doesn't just apply to TrustedID -- it's every company offering services like this," he said.

Fear Sells

The credit bureaus and banks were the first to realize that there was just as much money to be made from identity theft prevention as from the theft itself.

Credit monitoring, credit insurance, and fraud alerts all add up to major profits from people justifiably scared of being victimized by fraudsters and con artists. It's not surprising that private companies are getting in on the action just as readily.

As Fragala points out on his own blog, the race to provide customers with the least expensive credit monitoring will only benefit them in the long run, as they won't put up with paying heavy fees to view data that is rightfully theirs to begin with.

"So as long as the CRA's can make money off your data (much of which they get at no cost to themselves), then you should have a right to see it and be notified if something is happening to it," he said. "It's totally upside down that your personal identity and credit data could be compromised by a thief and you have to pay to see what is happening."

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