Identity Theft Insurance: More Bogus Bank Charges for Dubious Benefits

22 Jan Identity Theft Insurance: More Bogus Bank Charges for Dubious Benefits

Many credit card banks, in addition to insurance companies, are aggressively selling Identity Theft Insurance policies. These programs feature excessive premiums in return for little more than what is required by law.

One major national bank also charges the customer for the credit monitoring the bank does to protect its own interests. This bank automatically includes identity theft insurance in the account setup process, hiding the opt-out language in fine print and failing to disclose premium costs.

This new credit industry ploy surfaced in our office recently when a client showed us a slick portfolio of credit scores from the major national bank. Worried about identity theft after a bill collector fraudulently obtained her bank account information, she closed an existing account and opened a new one at the same bank. In the process she received what she thought was just a dressed-up credit report.This is a college-educated woman who exercises normal care in managing her financial affairs, not someone likely to overlook the obvious in a contract.

A paragraph midway down the second page of the 22 page credit report “brochure” states “When you activated your ….. debit card, you also enrolled for identity theft protection by pressing “1” on your phone and entering the last four digits of your social security number. Unless you call to cancel during the introductory period, your membership will automatically renew each month. For your convenience, we’ll simply apply your membership dues each month to the ….. debit card you used for enrollment.”

The only statement concerning premiums in this paperwork is an offer of a special introductory rate of $9.99 a month for family and friends who might want to add the coverage. The bank quoted a monthly premium of $12.99 over the phone.

What did she get for the fee? “Up to” $500 a week for up to four weeks for time taken off work to deal with fraud (our client is retired), notary and certified fees for delivering fraud affidavits (free at most banks), loan application fees for reapplication for loans denied solely because the lender was supplied incorrect information (assuming such a fee could even legally be assessed, and that the lender refused to waive it) and attorney fees for defending suits brought incorrectly by merchants and for challenging the accuracy or completeness of information in a credit report. The only part of this coverage involving amounts worth insuring against is the attorneys’ fees. So much for the compensation provisions of this insurance.

“Privacy Assist Premier” also notifies the client immediately if something suspicious appears his or her credit report, and provides unlimited online access to a personalized credit report such as the one included in our client’s packet, and access to a credit analyzer which allows a person to plug in credit scores and explore strategies for managing his or her credit.

These services do not necessarily require enrollment in this particular plan. Credit analyzers of various descriptions are also available as part of money-management programs, some in public domain. For their own protection, banks monitor accounts for suspicious activity possibly signaling identity theft. Thus, although these services are useful, representing them as features of the “Privacy Assist Premier Plan” is deceptive.

“Little” charges like this, which may end up not being so little, have a way of adding up. Free services for monitoring credit are even offered by one of the major credit reporting agencies. It’s important to read all that fine print, including what appears on some seemingly trivial piece of disclosure information attached to a contract, to ask questions, and to take action immediately when an unexplained charge appears on a billing statement. Unfortunately, it’s a jungle out there, and deception is the rule of the game.

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I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.
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