Experian challenges LifeLock on fraud alerts

Experian, one of the three giant credit reporting bureaus, recently filed a lawsuit in U.S. District Court in California, designed to stop LifeLock from selling a service that, among other things, puts temporary fraud alerts on customers' credit reports and automatically renews them every 90 days. LifeLock charges $10 per month or $110 a year for this service.

Fraud alerts warn prospective lenders that a credit applicant might be an ID thief, and they should take steps to verify the identity of the borrower. Under the federal Fair Credit Reporting Act, consumers who make a good-faith assertion that they suspect they are, or are about to become, a victim of identity theft, have a right to file such alerts on their own—for free. That’s one reason we criticized LifeLock recently in the Consumer Reports Money Adviser.

That hasn't stopped LifeLock from selling the service—heavily advertised through TV, radio, and newspaper ads featuring LifeLock's CEO Todd Davis, who claims the company offers protection so ironclad that he reveals his actual Social Security number. LifeLock says it's now adding 120,000 new subscribers a month and is closing in on 900,000 total customers.

Experian’s central argument is that the Fair Credit Reporting Act “does not permit the placement of an initial fraud alert by corporations such as LifeLock.” But the law does allow a “consumer” to directly place a fraud alert or an “individual” representing a consumer to place fraud alerts; it does not specifically say "corporations."

Experian also argues that LifeLock violates the FCRA, which allows temporary fraud alerts lasting only 90 days, saying that it doesn't anticipate a series of 90-day alerts that are perpetually renewed. Consumers who have had their identities stolen can get a 7-year extended fraud alert if they file an ID theft report.

The Federal Trade Commission has made no policy statement on the matter, but offers advice to consumers on whether or not to buy services that claim to protect against identity theft.

Davis says Experian’s suit is “frivolous.” Experian’s retort: “This is not a frivolous thing we’ve done. We don’t file frivolous suits,” says Donald Girard, a spokesperson.

Protect yourself
As Davis himself admits, a fraud alert “isn’t 100 percent bulletproof” protection against identity theft. Consumers Union, our parent organization, recommends that you consider using a “security freeze” to completely block access to your credit reporting file by all prospective lenders. This would stop ID thieves from opening new accounts in your name. You can unfreeze your file with a personal identification number. As of last year, all three credit bureaus allow anyone to freeze and thaw their credit report as they wish for about $10, less in some states, and for free if you've been the victim of ID theft. Click here for more information.—Jeff Blyskal

Comments

[Concerned Consumer]

One should also keep in mind that Experian is a $3.8 Billion foreign company headquartered in Ireland, that derives a significant portion of its revenue by selling consumer information. Another source of Experian revenue is derived from a competing product to that of what LifeLock is selling. I am not presenting an argument for either side, but feel there is more to the story than what one might think after reading this blog. As a recent victim of identity theft, I do however, find it troublesome that Experian, a company who is suppose to protect my identity is spending millions on a lawsuit in an attempt to stop a company from protecting my identity.

[concerned consumer 2]

One additional comment. While it is certainly true that one can put these restrictions on one's own account for free, renewing every 90 days, individuals can also change their own oil, do their own taxes, water their own lawns and do a host of other things for free, on their own. Nonetheless,many choose to pay a third party to handle the task for them. Lifelock has been clear that individuals can do this themselves, but the Lifelock solution is for those who choose to pay for the convenience and reliability of letting someone else do it.

[Denise Richardson]

Yes...I can set my own fraud alerts for free -every 90 days if I want to -but I don't want to do it anymore. Nor do I want to spend hours, days, months or years cleaning up a mess caused by one or more identity thefts! Yet that's what Experian seems to want from us.

The Credit Reporting agencies profit handsomely from selling our information -but what do they do for us?

They let us, for a cost, monitor our own information. And for a price we get to see our credit score -yet the recipe used to determine that all important score remains a secret.

They charge us to freeze and thaw our credit and they make us pay them for the right to see it -more than once! We are expected to play the role of a quality control expert that maintains as best we can a product they sell -regardless of its quality.

Research indicates that 1 in 4 credit reports have serious errors -yet the burdens to correct these errors continue to be the consumer’s battle -and with little to no help from the faceless entities known as the credit bureaus.

Now that multiple companies come along and offer products and services that will help with both protecting and restoring our credit, Experian cries foul.

Many of us can file our own taxes, but we hire accountants. We can cook our own meals, yet we go out to dinner and we can wash our own car, but it remains our choice whether or not we want to take on the task ourselves.

If I don't want to face dealing with an identity theft alone -and find value in having someone else do it for me, it should be my choice. It shouldn't be up to competing companies to determine what's best for me.

Experian may not realize that if they offered to monitor and maintain their own product (our credit reports) for free and promised to clean up fraudulent information or help us restore our identities once advised of a problem, companies such as LifeLock wouldn't be needed -but then, neither would their "free" Credit Report commercials.

[Jessica]

The comments posted here sound very much like the marketing copy from LifeLock materials.

When the fraud alert was created, I don't think any of the powers that be foresaw that they might be used before any actual proof of theft had occured, or that people or organizations would try to place a 90 day alert continually. I think it was intended to be a safeguard for those with a legitimate reason to believe they were a victim of identity theft. Placing an alert without such an indication is somewhat akin to crying wolf.

[Happy LifeLock User]

Experian is unhappy that they're not getting a piece of the pie with LifeLock. Their lawsuit has claims of fraud in it because it's a corporation requesting the fraud alert instead of an individual.

Experian has no qualms about trying to mislead consumers with 'freecreditreport.com' and the catchy little songs they play on commercials about a 'free' credit report. That's a website they own and operate. Their intent is to drive people to their 'free' site and then automatically enroll them in credit monitoring for much more than the cost of LifeLock.

As a happy customer of LifeLock, I use their services because of the guarantee they give to fix everything for me if my identity or wallet is stolen. I'm very much aware that I can do what LifeLock does for free and in fact had opted-out of pre-approved offers years ago and always get my free credit reports from annualcreditreport.com. I want the peace of mind knowing I'll have experts on call to do the work for me if my identity is stolen.

I used the promo code '9' and get their protection for $9 a month instead of $10. I find that an do-able amount to fit into my monthly budget.

[Chuck]

I don't think the law allowing consumers to file bonafide Fraud Alerts was intended to financially benefit a corporation like Lifelock while at the same time financially penalizing a credit bureaus like Experian.

Perhaps Experian needs to offer a voluntary "Consumer Alert", that acts like a Fraud Alert, for a nominal fee that would allow corporations like Lifelock to offer an apparently desireable service while at the same time allowing Experian to recover their costs.

[It about money]

People this lawsuit is all about money. Experian wants to be paid by Lifelock for every customer they sign up. Other identity protection companies like Loudsiren Debix and TrustedId already have deals signed that allow them to electronically place fraud alerts with the other credit bureaus. Their business model is the same as Lifelock and yet they are not sued. Why? - because they already pay. Lifelock will soon pay as well and the lawsuit will be dropped.

[GFT]

Though I can see the argument that Experian wants to be paid for the alerts that are placed by Lifelock, I don't think that this lawsuit is the way to go about that.

I'm curious why Equifax and Transunion have not joined this suit. Why Experian?

It would seem to me if one writes a letter authorizing Lifelock to act on their behalf, it would resolve the issue. But I don't think that Experian wants the issue solved. I think they want Lifelock to stop what it's doing for many reasons.

Another thing I notice is that now, when one Googles Lifelock, Experian comes up with the name. Perhaps this is also a way for Experian to get more recognition and notoriety by making itself part of the "wave".

[RDB]

Follow the money. It will answer most, if not all, your questions, no matter what the subject matter. We have the technology to stop identity theft dead in its tracks. But that's not profitable. The industry has created this problem, and allows it to continue, because there is MONEY to be made on both ends of the problem. And guess who pays -- the consumer, as usual.

[Sara]

I am concerned that Consumer Reports isn't exposing the Credit Bureaus for the frauds that THEY are.

Here I am, an individual with a right to my life and information. Here is Experian, Trans Union and Equifax, who insert themselves into my life, exerting control over my life by collecting private information from and about me.

Then, they sell that information to others.
On top of that, should I want to SEE what information they have collected on me, I am required to pay them for that PRIVILEGE. Oh - except for once a year. That's unbelievable.

I think society needs to expose this for the fraud that it is. We should have complete and full and unlimited access to information that is collected about us from any company that is not our federal government.

[ARG]

LifeLock is my 'identity insurance'...... I pay for car and health insurance and I consider my identity to be just as important!

[Phil Me In]

I knew it was only a matter of time before someone challenged Lifelock and there plan to protect people from identity theft. This kind of fraud happens all the time and these services are doing huge favors for busy people.