Monitoring credit takes more than “credit monitoring”

Following a data breach, the most common course of action has become to notify customers and quickly offer a free year of credit monitoring services. However, this may not be the most effective way for consumers to guard against fraudulent charges and identity theft – but it is one of the most expensive options.

Bo Holland, founder and CEO of AllClear ID, spoke with Advisen on the topic of compromised data and credit monitoring. Credit cards were the most highly compromised piece of data in 2014. Credit monitoring, according to Holland, “does absolutely nothing for those accounts you use every day.”

“To spend money on an expensive product that doesn’t track the fraud — it’s just an expensive mistake,” Holland said.

“Existing account fraud” – unauthorized charges on checking, savings, investment, or credit card accounts – can be more easily tracked by financial institutions. Almost every bank offers transaction alerts for concerned customers. The key is to making consumers aware that it is available and addressing a need not covered by typical credit monitoring. Such services can also keep track of fraud when consumers aren’t even aware their data have been compromised.

“Maybe you’re not seeing fraud, but it may also be true that your card is in the wrong hands,” said Holland. “It is data that’s living in the wrong hands and the implication is that there’s going to be fraud.”

Where credit monitoring will assist consumers is in the event that Social Security numbers have been stolen, Holland explained. Social Security numbers were the second-most frequently compromised information in 2014.

“That’s the key for opening up a new account – cell phones, loans, home loans, auto loans,” he said.

Holland added that some type of surveillance capability can continue guarding consumers long after a breach occurs and take a deeper look throughout the Internet at the information that could be misused.

“These cards get stolen in huge amounts. Thieves can’t use them all in a day,” he said. “It’s a proactive measure consumers can take.”

Consumers are gaining in awareness of the need for protection in the face of breaches. Holland added, “We absolutely see a huge shift in consumer awareness because of the high-profile breaches. They’re taking measures to protect their privacy and protect their accounts. While these are disasters, it’s nice to see consumers reacting.”

Holland highlighted a new development from the California Attorney General’s Office that offers guidance for consumers and businesses, one that he predicted would please the insurance industry, which frequently shoulders the cost of credit monitoring for breached companies.

“It’s the first time you have a regulator saying that credit monitoring doesn’t address these important accounts,” he said.  “Credit monitoring is the most expensive service, but it’s not effective. Clarity around this issue is going to provide things that are appropriate that are a lot less expensive.”