More on Experian vs. Lifelock

by Doug Pollack

There is a growing amount of legal commentary emerging in the discussion surrounding the Experian vs. LifeLock lawsuit. This week, Peter Bronson from The Union.com published an article titled "Business Law Bulletin: Experian vs. LifeLock Heats Up".

Relative to the false and misleading advertising issue, Mr. Bronson notes that:

"According to Experian's lawsuit, at least one Lifelock ad claims that the company's services make it virtually impossible for identity thieves to strike, but that fraud alerts are only effective against those particular types of fraud that require accessing a credit report. In other words, says Experian, Lifelock cannot protect against such forms of identity theft as an undocumented worker using someone's Social Security number to obtain a job; or against unauthorized use of a credit card."

It is interesting to see a credit bureau that advertises their credit monitoring services as a means to help deter identity theft relentlessly (who hasn't seen the FreeCreditReport.com ads on TV?) make the case for the inherent limitations in this area.

Mr. Bronson goes on to point out the ambiguities with LifeLock's famous $1 million guarantee:

"Lifelock does offer a $1 million guarantee that if a customer's identity is compromised, Lifelock will help restore the customer's credit standing and pay the cost of doing so. However, Lifelock's web site states that the guarantee comes into effect when a customer's identity is compromised "due to a failure or defect in our Service", a phrase that seems open to more than one interpretation. (If the service offers protection against only certain types of identity theft, does the guarantee only cover those specific types?)"

This is the first instance where I've seen someone dig into the specifics of this guarantee. The "service defect" provision certainly provides LifeLock with a get-out-of-jail-free card. Not to mention, given that it is the financial institutions who provide most of the financial fraud protection, how valuable really is a $1 million guarantee other than as a marketing gimic. I guess we'll all find out as this lawsuit unfolds.

Putting LifeLock to the Test

by Doug Pollack

Right on the heels of the lawsuit filed by Experian against LifeLock, the self-proclaimed leader in identity theft protection, which asserts that LifeLock uses deceptive advertising and misleading claims in advertising their service, as well as illegal means of setting fraud alerts on behalf of their customers, now a CBS news report by Jim Benemann has put LifeLock to the test, along with two other companies, Debix and TrustedID, that rely on credit bureau fraud alerts or freezes for protecting their customers.

It seems that based on this test, these products do not prevent identity theft as you might be led to believe based on LifeLock's advertising. So on to the test. The first thing he did was have three of his colleagues, Tom, Jillian, and Kristine, each sign up for one of the three services. Then...

"With their permission, CBS4's Jim Benemann took all of Tom, Jillian and Kristine's personal information including their social security numbers and dates of birth. Using that information, Benemann applied for the same major credit card in each of their names. The only little thing he changed was the address. Benemann asked for those credit cards to be mailed to his home address. Essentially, he stole Kristine's, Tom's and Jillian's identities.

The three testers weren't worried. They all figured they would get that phone call telling them that someone was applying for credit in their name and they would put a stop to it immediately. Tom waited, Jillian waited and Kristine waited close to their phones. They waited 24 hours, then 48 hours and then a week. Not one of them got a phone call from any creditor even though they had paid companies for credit protection."

It is worth noting, that a fraud alert can easily be placed by an individual for free, just by contacting the credit bureau. Unfortunately services like these make the fraud alert seem like a "silver bullet" for preventing identity theft. As this test proves, nothing could be further from the truth. The reporter goes on to note:

"And remember Kristine who signed up with LifeLock? A little more than a week after Benemann applied for a credit card in her name, that card arrived, mailed to him, at his home address. And that had Kristine all the more interested in finding out about LifeLock's $1 million guarantee...Here is what LifeLock had to say:

'The credit card companies have a contract with the credit bureaus that say they must honor fraud alerts. The fact that they chose not to is proof that the fraud alerts are not bulletproof. The good news is that this is where the LifeLock $1 million guarantee is most effective. LifeLock is not a credit monitoring service but a protection service in the event a fraud alert proves to be ineffective.' "

Having said that, LifeLock didn't clarify how they then provide "protection" for the victim of ID theft. In the past, LifeLock had outsourced victim recovery services to other companies. It would be instructive to know what they do for their victims today.

Experian vs. LifeLock Lawsuit

VS.
by Doug Pollack

The Red Tape Chronicles yesterday reported on a recently-filed lawsuit by Experian, a major US credit bureau, against Lifelock. This lawsuit represents the first "shot across the bow" for vendors of credit services that rely on placing continuous fraud alerts on consumer accounts with the credit bureaus.

About.com's identity theft site defines a fraud alert as a "flag that is put on your credit report through the consumer reporting agencies. This flag establishes that as part of any credit approval process, you need to be notified."

Lifelock's consumer service, which they tout as providing guaranteed protection against identity theft, relies solely on the setting of fraud alerts to provide consumers with the stated protection. The Experian lawsuit brings into question the efficacy of fraud alerts as a means to prevent identity theft.

The Red Tape Chronicles article highlights that a key assertion of the lawsuit is that LifeLock is using deceptive advertising practices and making misleading claims in order to persuade consumers to subscribe to their service. The article notes that the "credit bureau Experian is suing the identity theft prevention firm LifeLock, accusing it of deception and fraud in its familiar advertising campaign, which includes a spot in which CEO Todd Davis reveals his Social Security number and then brags about the effectiveness of the company’s protections. In the lawsuit, filed in U.S. District Court on Feb. 13, Experian contends that LifeLock's advertising is misleading and that the firm is breaking federal law in the way it goes about protecting consumers."

The Experian lawsuit also brings into question the legality associated with firms placing fraud alerts on behalf of consumers. The Red Tape Chronicles article notes that "Experian contends that LifeLock's chief ID theft prevention tool -- the placing of continuous fraud alerts on consumers' credit files – is illegal because, under the Fair Credit Reporting Act, fraud alerts can only be requested by the individual consumer or an individual acting on behalf of the consumer."

ID Safeguards provides corporations and consumers with identity theft services. Among these services are those that assist victims of identity theft with recovery of their identities taking a "fully managed" approach to recovery. Coincidentally, the company has handled identity theft recovery efforts for numerous LifeLock members who became victims of identity theft, despite the placement of fraud alerts by LifeLock.

The fact that LifeLock members do fall victim to identity theft should not be surprising. Fraud alerts do not prevent an identity thief from co-opting and using one of your credit cards. They also don't prevent someone from using your social security number to work. They further don't prevent thieves from signing up for utilities of telecommunications services using your identity. And they don't stop someone from using your personal information to get access to health care services.

Fraud alerts also don't prevent inquires for credit from showing up on a victims credit report. These "little dings" can have a detrimental effect on an person's credit score. Fraud alerts do have their place in dealing with a threat to your financial identity, but they are not a silver bullet and certainly are not a guarantee that individuals won't fall victim to identity theft.

Would You Notice $400,000 Missing From Your Checking Account?

by Rick Kam

In an article published in the New York Times by Sewell Chan on October 2, 2007, Chan reports that Mayor Bloomberg fell victim to Identity Theft.

"In early June, Mr. Bostic deposited a $190,000 forged check into the Sovereign account and a $230,000 forged check into PNC account, according to prosecutors. Both of the forged checks were drawn on Mr. Bloomberg’s personal account at the Bank of America and were issued in the name of the mayor’s financial manager, Geller & Company."

You might ask could this happen to me?

The answer is yes. There are many types of financial and non-financial ID theft. Credit card fraud and someone withdrawing money from your checking account happens a lot.

You might say, "I have a service that freezes my credit or automatically sets fraud alerts to guarantee against ID theft". The answer is, these solutions will prevent the issue that happened to Bloomberg - an ID thief stealing money being taken from his checking account.

There are new services on the horizon that monitor credit, checking, and other forms of financial and non-financial personal data to detect misuse of your information and provide 360 degree protection. You will see these new services become available in the market and be more effective, but cost roughly what consumers pay today for less effective solutions. More on this in a future post....

Costly Free Credit Reports

By Heather Wells (Recovery Advocate)

Do an online search for “free credit report” and you’ll end up with a dozen or more websites promising online credit reports (and often credit scores) for FREE. Most of these companies even have the word “free” in their name, but don’t be fooled, there’s nothing FREE about their services. Many will entice people to sign up for a product that comes with strings attached. Most will request a credit card number to enroll and then will charge you if you do not cancel the service within a specific grace period.

A recent post (July 24, 2007) on the blogsite The Red Tape Chronicles written by Bob Sullivan explains that “one site, for instance, requires enrollment in pricey credit monitoring service, which can only be canceled online after precisely 23 days. Another automatically enrolls users in a discount travel service. And some hint that the real free credit report site established by Congress -- AnnualCreditReport.com -- isn’t all it’s cracked up to be.” He goes on to say that many of these sites actually can be traced back to the credit bureaus either directly or by affiliation.

There’s only one legitimate source where you can obtain your FREE credit reports and that’s http://www.annualcreditreport.com/. The law requires that each of the major credit reporting agencies-Equifax, Experian, and TransUnion-give you a copy of your credit report every year at no charge. This law was passed as part of the Fair and Accurate Credit Transactions Act (FACTA) and was a real milestone for consumer rights.

Increased consumer awareness and knowledge is a good thing. It’s a positive sign that more folks are interested in what’s being reported in their credit files. Everyone should check their credit reports at least once a year to make sure that all of the information contained in them is accurate and up to date. You should also check your reports for any information that is fraudulent, which could signal that you are the victim of Identity Theft. This includes accounts as well as personal information such as addresses and phone numbers.

So, before you give over your credit card number for something that is supposed to be “free,” don’t do it. Go to http://www.annualcreditreport.com/.