State regulation, upstart anti-fraud rivals, and fading public interest in plain-vanilla credit monitoring may be catalysts behind Equifax’s newest credit-protection product. But security analysts say Equifax is also keeping in step with the larger trend of making prevention—not just detection—the backbone of identity security.

Among the features in the bureau’s ID Patrol monitoring product is a credit lock feature allowing subscribers to veto the creation of new accounts through their Equifax credit file. That alone is a gigantic leap, since bureaus have fought the idea of eliminating unfettered and lucrative creditor access. The new product also takes a next-level approach to alerts by using CardCop’s platform to actively comb the dark side of the Internet to track whether subscribers’ private data — including credit card and Social Security numbers—are exposed.

Equifax plans to market ID Patrol through banks as well as direct consumer sales, charging $14.95 per month for its direct sales.

“This, indeed, is a big step for a bureau,” says James Van Dyke, president of Javelin Strategy & Research, which publishes annual fraud and online safety rankings of banks and card issuers. ID Patrol is part of a larger trend, he says, “where personal identity management moves upstream from resolution to detection and finally, prevention.”

The credit lock matches a similar feature introduced by TransUnion last fall, but one not available from Experian. The option makes a consumer’s credit file unavailable for creating new accounts without specific authorization by the subscriber. It’s not an absolute credit freeze as existing creditors and marketers can access them for the usual fee.

Steve Ely, president of personal information solutions with Equifax, agreed that several factors have pushed forward the concept of the lock, including various state laws giving consumers the right to freeze credit files and the consumer use of third-party identity monitoring services such as LifeLock and MyPublicInfo. “It came about from a combination of many of those [factors],” Ely says. “There’s a lot of activity around file freezes at the state level —we had hoped a national law would have come to the forefront.”

LifeLock has been a controversial adversary of the bureaus—and even the subject of a deceptive trade practices lawsuit by Experian—because it uses the bureaus’ own fraud alert system to keep consumer accounts off-limits. LifeLock’s activity has irked the three bureaus that complain the company is not only charging consumers for a free service offered by them, but a disruptive middleman that degrades fraud alert systems by crying a perpetual state of wolf.

But Javelin studies in the past have shown that LifeLock can produce two key benefits for consumers: fewer incidents of identity theft and a significant reduction in mailed credit offers that are a growing source of fraud. Javelin’s analysis of 11 credit monitoring services provided by banks and bureaus has found they generally failed to prevent new account fraud, which costs an estimated $24.6 billion annually, according to Van Dyke.

Credit monitoring is ineffectual, and “consumers have wised up to the limitations,” says Gartner analyst Avivah Litan, via email. “Equifax has grown its direct-to-consumer business very quickly with credit monitoring—it became their cash cow, but the cow’s milk has started to dry up, so it’s only natural that they look for new direct-to-consumer revenue streams.”

How dry? According to a Gartner survey last year, only about 12 percent of the population had credit report monitoring. Only half paid for it, with the other half getting it free after a data breach. Gartner estimate then there were 14 million subscribers who eventually dropped it, and another 14.6 million who didn’t convert their comp service to a paid subscription.

Consumers instead have found better value with identity-monitoring service that provide real-time alerts to changes in reports as well as when fraud networks detect when their private info is in the public domain.

Some banks and service vendors have caught on to the customer demand for these higher-level alerts, utilizing services from LifeLock, Debix, TrustedID and Affinion Group-owned CardCops. Debix, which brags about a zero-percent new-account fraud rate, puts fraud alerts on customer accounts so that any credit requests must first go through the consumer.

Debix, which distributes to banks through Affinion, has landed 30 to 40 banks on Debix’s system. “Banks are definitely more interested in providing more protection options,” says Debix CEO Bo Holland. (c) 2008 Bank Technology News and SourceMedia, Inc. All Rights Reserved.

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