In our last installment, I described how one of the mortgage vendors who I was considering for the loan for my new home failed to trigger the credit alerting mechanism (Debix) to which I was signed up. Since then, I’ve learned several interesting facts. First, the way that Debix operates is that they insert a line into your credit reports which says, in effect, “you, the reader of this line, are required to call this 1-800 telephone number, prior to granting credit based on what you see in this report.” That 800-number finds its way to Debix, where a robot answers the phone and asks the human who called it for their name/organization, and the purpose of the request. Then, the Debix robot calls up their customer and asks permission to authorize the request, playing back the recordings made earlier.
The only thing that makes this “mandatory” is a recent law (sorry, I don’t have the citation handy) which specifies how lenders and such are required to act when they see one of these alerts in a credit report. The mechanism, aside from legal requirements, is otherwise used at the discretion of a human loan officer. This leads me to wonder whether or not the mechanism works when there isn’t a human loan officer involved. I may just need to head over to some big box store and purchase myself something with an in-store instant-approval credit card, just to see what happens. (With my new house will inevitably come a number of non-trivial expenses, and oh what great savings I can get with those insta-credit cards!)
So does the mechanism work? Yesterday morning, as I was getting into the car to go to work, my cell phone rang with an 800-number as the caller-ID. “Hello?” It was the Debix robot, asking for my approval. Debix played a recording of an apparently puzzled loan officer who identified herself as being from the bank that, indeed, I’m using for my loan. Well that’s good. Could the loan officer have been lying? Unlikely. An identity thief isn’t really the one who gets to see the 800-number. It’s the loan officer of the bank that the identity thief is trying to defraud who then makes the call. That means our prospective thief would need to guess the proper bank to use that would fool me into giving my okay. Given the number of choices, the odds of the thief nailing it on the first try are pretty low. (Unless our prospective thief is clever enough to have identified a bank that’s too lazy to follow the proper procedure and call the 800-number; more on this below).
A side-effect of my last post was that it got noticed by some people inside Debix and I ended up spending some quality time with one of their people on the telephone.Â They were quite interested in my experiences.Â They also told me, assuming everything is working right, that there will be some additional authentication hoops that the lender is (legally) mandated to jump through between now and when they actually write out the big check. Our closing date is next week, Friday, so I should have one more post when it’s all over to describe how all of that worked in the end.
Further reading: The New York Times recently had an article (“In ID Theft, Some Victims See an Opportunity“, November 16, 2007) discussing Debix and several other companies competing in the same market. Here’s an interesting quote:
Among its peers, LifeLock has attracted the most attention — much of it negative. In radio and television ads, Todd Davis, chief executive of LifeLock, gives out his Social Security number to demonstrate his faith in the service. As a result, he has been hit with repeated identity theft attacks, including one successful effort this summer in which a check-cashing firm gave out a $500 loan to a Texas fraudster without ever checking Mr. Davis’s credit report.
Sure enough, if you go to LifeLock’s home page, you see Mr. Davis’s social security number, right up front. And, unsurprisingly, he fell victim because, indeed, fraudsters identified a loan organization that didn’t follow the (legally) mandated protocol.
How do we solve the problem? Legally mandated protocols need to become technically mandatory protocols. The sort of credit alerts placed by Debix, LifeLock, and others need to be more than just a line in the consumer’s credit file. Instead, the big-3 credit bureaus need to be (legally) required not to divulge anything beyond the credit-protection vendor’s 800-number without the explicit (technical) permission of the vendor (on behalf of the user). Doing this properly would require the credit bureaus to standardize and implement a suitable Internet-based API with all the right sorts of crypto authentication and so forth – nothing technically difficult about that. Legally, I’d imagine they’d put up more of a fight, since they may not like these startups getting in the way of their business.
The place where the technical difficulty would ramp up is that the instant-credit-offering big-box stores would want to automate their side of the phone robot conversation. That would then require all these little startups to standardize their own APIs, which seems difficult when they’re all still busily inventing their own business models.
(Sidebar: I set up this Debix thing months ago. Then I get a phone call, out of the blue, that asked me to remember my PIN. Momentary panic: what PIN did I use? Same as the four-digit one I use for my bank ATM? Same as the six-digit one I uses for my investment broker? Same as the four-digit one used by my preferred airline’s frequent flyer web site which I can’t seem to change? Anyway, I guessed right. I’d love to know how many people forget.)