Identity-theft services make a slow start

Banks probably making fees too high, analysts say, despite customers' theft worries

A couple of random phone calls requesting Julia Burkhart's financial information was enough to convince Burkhart, a longtime customer at LSB Bancshares Inc., that she needed more eyes monitoring her accounts.

"One person called wanting to give me a wealth of money if I was willing to provide them with some money up front and my account number for deposit purposes," Burkhart said.

"The one that got to me was someone calling to say they had my Social Security number. I called the bank right away to make sure nothing fishy had been going on, which they said hadn't.

"We talked about their identity-theft services, and I just thought it would be worth paying $12.99 a month for the peace of mind of knowing nobody is messing with my accounts," Burkhart said.

Analysts said that there is increasing interest in enhanced credit-monitoring services as consumers try to avoid falling prey to identity-theft scams that have hit what is estimated to be 27 million victims in the United States.

SunTrust and LSB are featuring credit-monitoring packages in current marketing campaigns to differentiate themselves in an increasingly competitive market for financial services.

"It's certainly something we wanted to be first in the marketplace with for the lead advantage," Milton Kern said of SunTrust's Equifax Credit Watch Silver product. Kern is a Triad manager and a first vice president at SunTrust.

But analysts question whether consumers will balk at paying a fee, ranging from $34.95 to $156 a year locally, for access to the products.

Especially if consumers believe that they should receive equal protection regardless of the amount in their accounts. Consumers can avoid the credit-monitoring fee at some financial institutions by keeping a minimum amount of money in a premium account.

Marc Fusaro, an assistant economics professor at East Carolina University, said that financial institutions are "running the risk of highlighting what they are not already doing to protect their customers" with the enhanced credit-monitoring products.

According to analysts and financial officials, about 10 percent of consumers have signed up for enhanced credit-monitoring services. That is even though an April study sponsored by SunTrust Banks Inc. found that 42 percent of consumers are concerned about identity theft.

"Maybe it's just me, but I think that paying for access to my credit file is a little like paying for access to my medical records," said Tony Plath, a finance professor at the University of North Carolina at Charlotte. "It is, after all, my information. Why should I have to pay anything at all to access it?"

Most financial institutions in the Triad said that they charge a fee for the enhanced services because of the cost of technology and personnel needed to monitor accounts.

Some analysts said that the enhanced credit-monitoring service is just another strategy for entrenching customers and increasing fee-based income - a more dependable source than loans.

Other products with entrenching potential are online banking, direct deposit, credit and debit cards, wealth and asset management, and insurance services. Fee-based income includes service charges and commission fees.

Financial officials said that getting a credit checkup every year should be as important to consumers as a doctor's physical. They also caution that consumers ultimately are responsible for being aware of the activity in their accounts.

The officials said that having access to daily or weekly credit reports can help consumers spot identity-theft scams that typically start with stealing small amount of money over several weeks or months.

But some consumers consider enhanced, indeed any, credit monitoring an unwelcome intrusion into their financial habits, said Ed Aycock, a senior vice president with the N.C. Bankers Association.

It is clear that recovering from identity theft can be costly in time and money for the victims.

North Carolina officials said that about 300,000 residents a year are victims of identity theft. The typical victim spends $800 and 175 hours to clean up his or her credit and erase an average of $18,000 in fraudulent charges, according to the N.C. Attorney General's office.

Among the victims are at least 700 bank and credit-union customers in the Triad affected by an international identity-theft ring in October. Their accounts were compromised by either unauthorized electronic debit-card charges or the skimming of the magnetic strips on debit cards for account information. Most accounts were made whole within two weeks, the financial institutions said.

Also in May 2005, Wachovia Corp. and Bank of America Corp. notified more than a combined 100,000 customers that their financial records might have been stolen by nine people arrested in New Jersey on fraud charges.

Getting a free credit checkup is available at www.annualcreditreport.com, which is operated by the three major credit bureaus - Equifax, Experian and TransUnion. A report can be obtained for free once a year from each group.

But a study at the University of Utah found that the Web site is cumbersome for retrieving reports because of security and logistical reasons. A consumer who wants a credit score still has to pay for it - at least $6.95.

SunTrust's product provides a free weekly credit-monitoring program, a free annual checking report from Equifax and up to $2,500 in identity-theft insurance to customers of four premium checking accounts. Those accounts require at least a $1,500 minimum deposit balance to avoid a $9 monthly service charge. The cost to free-checking customers is $34.95 a year.

"We know that competitors may offer similar products, but not at our cost and not at our marketing level to consumers," Kern said.

Plath said that even at $34.95 a year, SunTrust's credit-monitoring service is "probably priced too high for most consumers to consider its purchase even though they do need it."

"Thus, I don't think it will provide the motivation for many consumers to move their primary direct-deposit account to SunTrust," Plath said.

LSB's PrivacyGuard service is offered free for 30 days, then for $12.99 a month.

The service includes daily monitoring, a credit alert, unlimited access to the credit bureaus' reports, $10,000 identity-theft insurance and a 24-hour hotline to report identity theft.

Frank Sherron, the president of LSB, said that because PrivacyGuard gives customers increased access to their credit scores, they can better plan large purchases.

Fusaro, the East Carolina assistant economics professor, said that the price of $12.99 a month is actuarially fair if the average cost of an identity-theft solution is $52,621.

"But this (LSB) policy only covers you for $10,000 of damage," Fusaro said. "In other words, it is priced over five times greater than the actuarially fair price."

BB&T Corp. offers two credit-monitoring products, spokeswoman A.-C. McGraw said. Its Plus package is $4.95 a month and can be added to a direct-deposit account. It offers payment-card protection and up to $2,500 in identity-theft insurance toward credit restoration.

BB&T's Privacy Matters, a separate product at $9.95 a month, offers 24-hour credit monitoring with weekly fraud alerts, free access to the credit bureaus' reports, card cancellation and restoration services, emergency cash and up to $25,000 in identity-theft insurance.

Wachovia Corp. provides an Identity Guard product for $12.99 a month that has had a small customer sign-up to date, said Brian McGinley, the bank's director for loss management.

"That's more of an educational issue that we're dealing with by promoting it on the Web site, in customer mailings and in the branches," McGinley said.

"The fraud environment is very hostile out there, and customers have a higher likelihood of being affected if they don't take proactive steps to protect their accounts."

Truliant Federal Credit Union offers its members an Equifax Credit Watch Gold package that costs $9.05 a month. The package offers up to $20,000 in identity-theft insurance and daily alerts of key account changes.

Ginger Salt, a senior vice president of marketing at Truliant, said she can recommend the product from personal experience because she was an identity-theft victim before joining Truliant.

"As people become more aware, or become victims, of identity theft, they want their financial institutions to take a more proactive stance in monitoring it," Salt said.

Analysts said that as more consumers sign up for credit-monitoring products, the cost likely would decrease over time.

"The marketplace is in the process of finding an equilibrium for identity-theft products," said Greg McBride, a senior financial analyst at Bankrate.com.

"I wouldn't be surprised if the products become a commodity and a free product just like free-checking accounts and free online-bill pay over time.

"Most consumers realize that no financial-monitoring system is fail safe. They just want one that alerts them that someone is breaking into their financial accounts so that steps can be taken to stop or limit the damage.

"When consumers gain confidence that the products accomplish that goal, that's when you'll see more consumers signing up," McBride said.

• Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.