Credit Advice

Experian sues LifeLock, Inc.

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Credit Advice

Experian sues LifeLock, Inc.

Dear Readers,

You may already have read or heard that Experian is suing LifeLock, Inc., a company that claims to provide identity theft protection. I think it is important for you to understand why we have taken this action.

We allege in our lawsuit that LifeLock is engaging in deceptive and fraudulent behavior that harms consumers and Experian.

To understand our concern about their service of placing fraud alerts on all their subscribers’ files, it is important to understand the important role that fraud alerts play for real victims of fraud.

My response to GID in a recent column explains fraud alerts in great detail, as well as how to use them and when to do so.

Once added by a consumer, Experian and the other credit reporting companies provide the fraud alerts with every report delivered to consumers or businesses. Creditors who depend on credit reports to provide services to consumers rely on fraud alerts to warn them to take additional steps to verify an applicant’s identity before opening a new account.

Experian is very concerned that by adding millions of fraud alerts to its database, LifeLock will degrade the value and meaning of those alerts. Like the boy who cried wolf, the alerts will become less meaningful to credit grantors, and their effectiveness will be diminished, putting true victims and those who legitimately add the alerts at greater risk.

When Congress enacted the revisions to the Fair Credit Reporting Act (FCRA), it did not intend for corporations to be able to add fraud alerts on behalf of consumers. Rather, Congress intended for the alerts to be added by victims and those with reason to believe they were about to become victims.

Lawmakers clearly did not intend for fraud alerts to be added in huge numbers by corporations that are selling the service. In fact, federal law prohibits credit reporting companies from charging consumers to add these same alerts.

Each time a victim contacts a credit reporting company to request an alert, that alert is shared among the three credit reporting companies. Three separate confirmations are then mailed to each consumer. Three free reports, one from each company, are offered to each victim.

When LifeLock requests this victim assistance for its members every 90 days, they flood Experian’s database with hundreds of thousands of illegal fraud alerts. This is contrary to what Congress intended when it passed the amendments to the FCRA.   

Experian is also concerned that consumers may believe the claims that an alert is a foolproof means of protecting them from identity theft, when in fact the LifeLock service does not protect them from identity theft at all. This fact was proven when the president of LifeLock was himself victimized after advertising his Social Security number and name on television and through other means, despite his claims to be a subscriber to his own services.

An identity thief used his Social Security number to fraudulently apply for and receive a payday loan, which did not involve getting a credit report. Because no credit report was accessed, a fraud alert could not prevent the fraudulent transaction.

Fraud alerts help protect consumers who either are a victim of identity fraud or believe that identity fraud is imminent, by alerting lenders of that fact. Because they have been alerted to the identity theft, lenders can take action to verify the identity of the applicant and stop new accounts from being opened once an identity has been stolen. Congress recognized this fact when it wrote the amendments to the FCRA, which makes clear that the alerts are intended for identity theft victims or those who have reason to believe they may be victims, and not as a proactive tool.

Additionally, as Experian alleged in its suit, LifeLock claims to provide a free report to its members each year. What it does not clearly disclose is that the “free report” is actually the report every consumer is entitled to once every 12 months by federal law.

The “free report” is already free to consumers and can be requested at www.annualcreditreport.com. Experian alleges in its lawsuit that LifeLock is deceiving and defrauding consumers by using that report without adequately informing consumers. Consumers should be able to use this service when they want.

Similarly, LifeLock claims that its services drastically reduce junk mail and preapproved credit offers. They are simply posing as their subscribers and using the free opt-out service provided by the national credit reporting companies. What LifeLock does not disclose is that you can do this for free by calling 1 888 5OPTOUT (1 888 567 8688).

Taking this step will remove you from preapproved offer lists compiled by Experian and the other national credit reporting companies for a period of five years or permanently if you choose to do so. It will not, however, remove you from mailing lists compiled by others, or prevent you from receiving marketing offers for other products and services. Those lists are not compiled by the national credit reporting companies.

I applaud our readers for being interested in learning about credit reporting, taking an active role reviewing your history, and understanding how important it is in helping you obtain services. I hope that this column will help you better understand why Experian is taking this action against LifeLock.

Thanks for reading.

- The "Ask Experian" team

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