LifeLock Inc., an identify-theft protection company, has been sued for breaking the law and defrauding customers. LifeLock says it has approximately 1.5 million customers who pay a $10 a month fee to protect their credit against theft. For that fee, the company checks the customer’s credit report with major credit bureaus. The company then provides customers with alerts (email, postal, or phone) when their personal info is being used to apply for credit. The company removes customers from pre-approved credit offers and sends the customers their credit reports every 12 months. It also provide a service to cancel all accounts if the customer’s wallet is stolen.
To prove the service worked, CEO Todd Davis televised a commercial in 2005 in which his personal social security number, which was protected by the service, was shown on screen.
Many critics charges that LifeLock was charging customers for a service that was offered for free by the major credit bureaus – Experian, Equifax, and TransUnion. People who believe they have fallen victim to ID theft can ask that alerts be sent from these credit bureaus for free.
Experian filed a lawsuit against LifeLock in February 2008. The lawsuit stated that the Fair Credit Reporting Act allows only for individuals to set the fraud alerts, not companies such as LifeLock. Experian stated that when LifeLock sets a fraud alert, it costs them money because they must in turn contact the other two agencies and mail notices to consumers. It believes that LifeLock’s fraud alerts clogs the system and prevents it from working as it should.
Last May, the judge in the federal lawsuit, Andrew Guilford, ruled that LifeLock fraud alerts, which are the cornerstone of its services, are illegal. LifeLock is challenging the decision, stating that their services offer a convenient way for customers to manage alerts. Davis likened it to changing your oil – you can take the time to do it yourself or have someone do it for you. Since the ruling, both Experian and Equifax have stopped accepting fraud alerts from LifeLock. However, TransUnion is still accepting them and when the LifeLock alerts are sent to them, it are required to forward the alert to the other two bureaus.
Other lawsuits filed against LifeLock concerns what some see as LifeLock’s misleading loss coverage policy. One of their commercials states “If anything happens for any reason while you’re a client of LifeLock, we will cover all losses and all expenses up to $1 million.” However, the terms and conditions state that this doesn’t cover actual losses by the customers, but the hiring of a third party to clean up their credit after the theft.