You may not know Todd Davis, but you probably have seen his Social Security number plastered all over magazines, newspapers, television - even wrapped around public buses. (457-55-5462)
Davis is the CEO of LifeLock, a company that focuses on identity theft prevention. Their advertising has been hugely successful, with 700,000 customers each paying $10 per month for the service.
The service essentially consists of continuous fraud alerts being placed on your credit report, to be renewed automatically every 90 days. LifeLock's services also include stopping junk mail and the mailing of pre-approved credit card offers, and a copy of their credit report. The company offers a $1 million guarantee that it will help restore customers’ credit reports if they suffer an identity theft.
Experian says that LifeLock's practices are costing them "millions of dollars." Some of this is due to the thousands of calls funneling through various phone banks from LifeLock, resulting in "excessive phone charges." And, since the credit bureaus make a lot of money by selling consumer data to potential creditors, fraud alerts drastically limit their revenue capabilities.
The Lawsuit
Experian contends that the placing of continuous fraud alerts is illegal - that the Fair Credit Reporting Act only allows the consumer or a person acting on behalf of the consumer to place fraud alerts - and that LifeLock is intentionally deceiving the bureaus by posing as customers.
Experian also says that the fraud alerts can only be placed when the consumer believes that fraudulent activities are imminent, and not just for anyone who wants one.
Pot, Meet Kettle
Experian is bent out of shape that LifeLock would charge consumers a fee to do what they can do legally for free. For example:
- You can call any of the Big 3 credit bureaus to request an initial fraud alert if you suspect that you have been, or are about to be, a victim of identity theft. Once the alert is in place, potential creditors must use "reasonable policies and procedures" to verify your identity before issuing credit in your name. You do not need to call each of the three credit bureaus - they are required to report this to the other bureaus.
- In addition, when you place an initial fraud alert on your credit report, you can order one free credit report from each of the three nationwide consumer reporting agencies. You also can request that only the last four digits of your Social Security number appear on your credit report. You also can order a free credit report from annualcreditreport.com.
- You can stop junk mail and remove yourself from pre-screened offers by visiting http://www.optoutprescreen.com/ or call toll-free to 1-888-567-8688. You can choose to opt-out of offers for five years or permanently. (You also can add yourself back onto the list.)
With credit monitoring as the centerpiece of Experian's freecreditreport.com service, it's easy to see why Experian is attacking its new competitor.
The Truth Is....
Experian, no stranger to misleading and deceptive advertising, also claims that LifeLock is engaging in misrepresenting the effectiveness of its service. In one ad, LifeLock says, "You’ll find out how to lock down your identity, making it virtually impossible for identity thieves to wreak havoc on your good name."
Fraud alerts, however, don't prevent fraud from happening. It simply makes it harder for identity thieves to open up credit in your name. If an identity thief already has your credit card or Social Security number, a fraud alert won't stop the misuse of those items. Even Davis admitted in an interview that if an undocumented worker is using your Social Security number to obtain employment (a very common form of identity theft), there isn't much that LifeLock can do to stop it.
Is Your Grocer A Crook?
Beyond the legal issues Experian is jawing about, the hot issue seems to be whether LifeLock is a scam for charging consumers to do things they can do themselves for free, or if they simply are providing a convenience at a low monthly cost. LifeLock customers appear to be happy with the service. Yes, you can do these things for free. LifeLock clearly states this on their Web site. But every day, we pay for convenience. After all, you could grow your own food - does this make your grocer a crook?
More and more, people are finding that dealing with the Big 3 is a time-wasting hassle. If you don't want to pay for the service, you've now got the tools to do it yourself. If you want someone else to do it for you, $10 a month is not unreasonable.
One thing to be aware of: Experian states in its lawsuit that LifeLock uses annualcreditreport.com to order the customer's credit report. Customers who are unaware of this practice may try to use their once-a-year benefit and get turned down because LifeLock has already tapped the free report for the year.
