Judge's ruling against LifeLock both good and bad for consumers
Filed under: Ripoffs and Scams, Fraud, Identity Theft
A recent federal judge's ruling says that LifeLock is breaking California law when it puts credit alerts on consumer files at credit reporting agencies. The lawsuit was brought last year by credit reporting agency Experian, which alleged that LifeLock was abusing the fraud alert system to make money off its customers.
Fraud alerts came on the scene in 2003, when a new law allowed consumers to put alerts on their credit files if they believe they have been a victim of identity theft or are at serious risk of becoming a victim of identity theft. The fraud alert means that creditors are supposed to contact you directly before opening a new line of credit in your name.
In reality, that doesn't always happen. Creditors may see a fraud alert on your report, but not take any steps to verify that it's really you trying to obtain credit. The law says they should try to phone you at the telephone number on your credit file, but beyond that, there's no guidance and apparently little recourse if the creditor doesn't follow through. For this reason, I caution consumers against putting much faith in the fraud alerts to begin with.
Privacy experts say this judge's ruling will harm consumers, who should have the right to pay a company in order to manage their profiles at credit reporting agencies if they want to. I agree in theory that it shouldn't be wrong for consumers to pay someone else to handle the fraud alerts. However, if this ruling stops more consumers from giving money to LifeLock, that's a wonderful side effect.
Why? Because I think LifeLock sucks. The company lures in consumers with false promises like their worthless "$1 million guarantee." This "guarantee" is promoted as LifeLock's promise to do whatever it takes to restore your good name if you're a victim of identity theft. Unfortunately, the fine print says that LifeLock is only going to do that if your identity theft is a result of a "defect" in their service.
If someone steals your wallet, is that a "defect" in LifeLock's service? No. If someone steals your credit card number at a restaurant, is that a "defect" in LifeLock's service? No. Can you think of any situation in which the theft of your identity would be LifeLock's fault? Probably not. So the company will never have to make good on this gutless guarantee.
And LifeLock couldn't prevent its own president, Todd Davis, from having his identity stolen, even when LifeLock commercials deceptively suggest he's so protected that it's safe for him to give out his Social Security number to everyone. The truth is that there has been at least one successful scammer who has fraudulently used Davis's identity. But don't expect LifeLock to tell you about that incident. .
The truth is that the services being sold by LifeLock have very little substance. The services simply aren't worth the price for most people, even if it is only $10 a month. Such a small price makes it easy to lure new customers, but you'd be better off using that money to actually lock your credit file with each credit reporting agency.
Tracy L. Coenen, CPA, MBA, CFE is a fraud examiner and forensic accountant who investigates corporate fraud and consumers scams, and is the author of Essentials of Corporate Fraud and Expert Fraud Investigation: A Step-by-Step Guide.



Reader Comments (Page 1 of 2)
5-29-2009 @ 5:09PM
Kurt Artecona said...
In my personal opinion this is another strike against consumer rights. Companies like Experian may legally sell our personal information at will for profit, but they are reluctant to do what is in consumers best interest. LifeLock not only protects it's customers but has made it possible for other companies to advance competitive offerings thereby improving industry standards, which is a good thing. Additionally LifeLock has been the most clear in it's explanation of the identity and privacy challenges we all face and working as an advocate of our privacy rights. "Here is my social security number!", This really says it all, doesn't it? Personally I find what Experian is doing deplorable and disturbing. What can we do though? It's out of our hands, isn't it... I do however believe that in the end the ruling won't stand. It is really at it's core anti-american and generally against the rights of citizens.
Finally the customers suing LifeLock never lost a dime, again this brings up another issue that is very frustrating. We live in such a litigious society it is very hard to even do business of any kind successfully without having to worry about predatory lawsuits.
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5-29-2009 @ 5:12PM
Tracy Coenen said...
I don't see LifeLock as "helping consumers." I see them taking advantage of consumers' fears and playing on the paranoia surrounding identity theft to profit. They add almost no value, and their "guarantee" is essentially worthless.
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5-29-2009 @ 5:52PM
Kurt Artecona said...
Tracy,
Are you aware that literally every person of the nearly 1.5 million LifeLock customers have no complaints of losses do to identity theft? The only complaints to date have no actual losses associated with them. If their system, customer service and guarantee didn't work they would have over 45,000 angry clients. Also my sister had her identity stolen and it cost her, her credit and months of work to recover. This happened over ten years ago and to this day she still has erroneous information in her Experian account that they refuse to correct. I am willing to listen to you but I can't relate at all to your point of view.
Best,
Kurt
5-29-2009 @ 7:25PM
Tracy Coenen said...
Kurt - I'd love for you to prove that "nearly every" customer of LifeLock has had no problem with identity theft. You can't prove it. But even if you could... do you realize that the vast majority of people in the U.S. have NOT experienced identity theft? If LifeLock customers haven't been victims of identity theft, I assure you it's not because LifeLock has prevented it. That's what they'd have you believe, and that's precisely one of the reasons why I think LifeLock sucks.
5-29-2009 @ 5:23PM
Mike Thomas said...
The law the judge ruled on (FCRA) was clearly, specifically written to disallow companies from setting fraud alerts (using the term “individuals”). There is no question of the intent of the law to exclude companies.
The judge’s job is to interpret and uphold the law. His ruling in Experian v. Lifelock did just that. In fact, the evidence was so clear and not in dispute on the claim, he issued a partial summary judgment. This means THE CLAIM DID NOT EVEN NEED TO GO TO TRIAL. That’s how blatantly Lifelock violated the law.
Now Lifelock, Debix TrustedID and similar companies are in trouble because Experian can file for injunctions to stop their illegal business practices (Debix already caved in and dumped their fraud alert product). The next step is for a trial to assess damages against Lifelock. And there are still eight other claims in Experian v Lifelock that are on track to go to trial later this year.
One fact is not in dispute: Lifelock built their business on illegal business practices.
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5-29-2009 @ 5:55PM
WriterLady said...
The entire complaint boils down to this phrase within the legislation establishing the right to fraud alerts: ‘‘Upon the direct request of a consumer, or an individual acting on behalf of or as a personal representative of a consumer ..."
The rest of Experian's original complaint accusing LifeLock of misleading advertising was determined to be without merit, and was dismissed.
It was an alarming accusation from Experian, a company that has repeatedly been investigated by the FTC and fined for their misleading advertising.
In fact, Experian is currently under investigation by the Florida Attorney General for the same activity as well as charging consumers' credit cards without permission, and for making it impossible for consumers to cancel membership in Experian's credit monitoring service before charges are levied.
Keep in mind this was just a pre-trial partial summary judgement. There hasn't been a trial, an injunction or a penalty; LifeLock hasn't been tried or found guilty of anything.
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5-30-2009 @ 8:25PM
DanInDixie said...
Kurt, the idea behind identity-theft protection is a good one. It's just that LifeLock was going about it the wrong way. As was pointed out, an individual or someone acting on their behalf can place the fraud alert. However, members of Lifelock are not asked to sign a power of attorney, so Lifelock is acting improperly in this case.
There are many ways to protect oneself from identity theft, to be notified or warned when you are a victim, and to get help once you have been a victim. Lifelock just isn't any of those.
Dan Andrews
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6-02-2009 @ 6:53AM
Kurt Artecona said...
Tracy implies in her post that identity theft is not a major threat to the american public. Approximately 3% of the US population is compromised every year, that qualifies as a major threat in my book. I don't know why Tracy is so apposed to fraud alerts provided by a company like LifeLock. Fraud alerts combined with customer support and a guarantee is a very good idea because it actually works. I have not seen any company with a better solution and I am familiar competing concepts services. LifeLock by setting fraud alerts and providing tools like Walletlock reduce your chances of becoming a victim to such a degree they are able to guarantee they can make anyone who is compromised financially whole. To date they have even protected those who were compromised prior to signup up with them and those compromised from non credit related fraud. Tracy doesn't seem to understand that although I can't prove that none of LifeLock's 1.4 + million users have suffered losses, it is clear that not one single complaint has been filed where a loss has been claimed.
Additionally, we see an argument from Dan that there are other ways to protect yourself from identity theft and I agree with that statement. I wish it were that simple Dan. However, OUR private information is owned and sold by companies such as Experian. We don't have any control over that. Additionally there are many other companies that collect and own our personal data that are yet to be regulated. The bottom line is we don't control our personal data. No matter how careful you are as an individual you can't control these companies and methods by which they disseminate your private information.
Now on to Debix, Debix is abandoning the fraud alert as a method of protection. I think Debix needs to rethink this decision. We still need fraud alerts! Right now as things stand there is no other protection other than a burdensome credit freeze that can protect us. Debix has done a good job coming up with technologies in personal credit protection services and I sincerely hope they stick to their guns. So I applaud any company that fights for our rights. As far as Tracy and Dan's comments, it's very easy to use terms like "suck" etc... and for them to be vague in their explanations. But I challenge them to provide a solution better than what LifeLock offers. The fact is, LifeLock is the best game in town. Maybe one day we will see better solutions but we won't see any if we are unwilling to stand by companies that protect our rights.
I would like to hear what solutions Dan and Tracy propose. There are a number of new companies providing various services and some of them are advancing the cause. Which of these do you think is getting it right? My personal belief is that we need this industry to push this conversation forward. As technology improves so do the methods of identity thieves. We need someone on our side with answers. So far to date LifeLock has been that company.
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6-02-2009 @ 8:18AM
Tracy Coenen said...
LifeLock is far from the "best" that's out there. The best thing consumers can do at this point is manage their own fraud allerts and actively monitor their credit throughout the year on their own. Quite simply, LifeLock provides them NOTHING on top of what they get by doing this themselve. (LifeLock actually provides less.)
I'd like to invite you to prove your claim that no victim of identity theft has been left uncompensated by LifeLock. How on earth could you make such a statement without proof of any kind? You're flat out lying to the readership. (Not that I expect anything less from a supporter of this nonsense, however.)
6-02-2009 @ 9:05AM
Michele P said...
I don't think that there is any question as to the fact that people can place fraud alerts themselves, even the LifeLock website explains that. It just doesn't make sense to "outlaw" a service that people have a choice to enroll in. Not everyone WANTS to go out and place their own fraud alerts to protect their credit and may decide that they want a company to do it for them. How is this wrong? This removes a freedom of choice for LifeLock consumers and now those who did enroll will lose a portion of the service that they chose to pay for.
I can think of services that I pay for that I could do myself, I just chose not to for the sake of convenience (getting the car washed or my nails done, etc). It's called running a business and that is all they are doing.
It's not fair to rule against LifeLock without taking into account some of Experian's unethical practices. They offer your "free" credit report with an enrollment in a $14.95 per month service, when you can really get your free credit report for FREE!
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6-02-2009 @ 10:24AM
Tracy Coenen said...
Of course it IS "fair" to rule against LifeLock. The company was not complying with the law. Hence the ruling.
6-02-2009 @ 12:18PM
WriterLady said...
Tracy,
A study by Javelin Strategy and Research concluded there were 10 million ID theft victims in 2008. The Identity Theft Resource Center investigated 656 known data breaches in 2008. An investigation by VerizonBusiness reported 285 million records exposed in 2008. Identity theft was the number one complaint category in the FTC's Consumer Sentinel Network in 2008. Despite all this, you conclude that LifeLock is fueling and taking advantage of consumers' paranoia?
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6-02-2009 @ 12:53PM
Tracy Coenen said...
Yes, of course LifeLock is taking advantage of paranoia. They provide almost no value to their customers, and do almost nothing to protect them. So of course they're profiting off paranoia.
6-02-2009 @ 4:26PM
Kurt Artecona said...
Tracy,
Regarding you use of the term paranoia. What do you mean by that? How is protecting assets from a proven threat paranoia? Would you say a company that provides a burglar alarm is profiting from paranoia about break-ins? I have had my home burglarized an it was a life changing experience that I could have done without. I have an alarm now and have not had a problem since. Maybe it's luck or maybe it's the alarm sign etc.. I don't care because I know I have done what I can to reduce risk. LifeLock reduces risk. I wish my alarm company had a guarantee like LifeLock does. But unlike LifeLock my alarm company isn't that confident. Do you hate other companies like Debix etc...? or are you just a hater in general of all things that make money?
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6-02-2009 @ 3:38PM
Tracy Coenen said...
I do not believe that LifeLock protects assets or reduces risk.
6-02-2009 @ 4:37PM
Kurt Artecona said...
Can you explain yourself in detail? LifeLock places Fraud Alerts with TransUnion every 90 days, they offer WalletLock and other services in combination that make it easier to recover from loss of your wallet or be notified when personal data is on the internet etc.. Their "total service guarantee" although it only officially covers credit fraud also can be used to cover other types of fraud. They have customer service 24hrs a day and are trained to make sure customers are taken care of to their 100% satisfaction even if it involves thinking outside the box. Did you know that? There are numberous testimonials describing LifeLock's customer service all over the net. And what about the other smaller less solid companies providing services that are similar? So what am I missing here are they a problem in your eyes?
If you have LifeLock you are way better off than if you don't. Please explain your position as I look forward to your substantial and articulate response.
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6-02-2009 @ 8:55PM
Tracy Coenen said...
The fraud alerts have value, albeit very limited. WalletLock has no value. They have sold you a bill of goods. Notify you when you personal data is on the internet? Puh-lease. Read the company's guarantee. It is meaningless. The chances LifeLock will "help you get back your good name" are slim to none. You've bought the bill of goods they're selling you. Unfortunately, there's no real substance behind it.
6-02-2009 @ 4:47PM
Tammy Elod said...
After reading the story I was pretty anti-Lifelock based on your writing Tracy. Now after reading the comments where your readers have laid out some very strong points I'm starting to think you're just a shill for Experian.
So far the users commenting have done a good job of backing up their opinions with facts. All you've done is put out your opinion without any factual backing whatsoever. Michelle P mentions a very good point about "Free" Credit Report and you completely ignore it.
Here's your reply to another commenter: "I'd like to invite you to prove your claim that no victim of identity theft has been left uncompensated by LifeLock. How on earth could you make such a statement without proof of any kind? You're flat out lying to the readership."
Where's your proof that victims of identity theft weren't compensated by LifeLock if there were a LifeLock member? How on earth could you make such a statement without proof of any kind? You're flat out lying to the readership Tracy.
You sure to preface a lot of your posts with "I do not believe" and "I don't see." If this is the way you wrote both of your book then I'm guessing the reference page is pretty short.
Please, start using some sound facts and research to back up your claim that "LifeLock sucks." Otherwise I'll consider any further articles as advertorials instead of journalism.
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6-02-2009 @ 8:56PM
Tracy Coenen said...
You wrote: "Where's your proof that victims of identity theft weren't compensated by LifeLock if there were a LifeLock member? How on earth could you make such a statement without proof of any kind? You're flat out lying to the readership Tracy."
I never said that. You did.
You wrote: "Michelle P mentions a very good point about "Free" Credit Report and you completely ignore it."This article isn't about "free credit report." But I don't like those services either. They're just a way to con people into buying worthless services.
6-02-2009 @ 5:29PM
Kurt Artecona said...
Hey Tammy,
I just asked Tracy a question, before slamming her, give her a chance to respond. She might be at work and trying to slip responses in between coffee breaks. As far as Michelle's and Writer Lady's responses I agree they back their opinions up with facts and I think we all appreciate it when opinions are more than just that but have some basis.
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