February 21, 2008 - You've probably seen some of the ads featuring Todd Davis; LifeLock's CEO. They show a truck with a billboard featuring a Social Security Number driving around on city streets. The SSN belongs to Davis and he boldly claims that he's not concerned with identity theft because he uses LifeLock. The advertising campaign has been tremendously successful and it appears that Experian has finally had enough of it. So Experian has filed a law suit against LifeLock, in an attempt to put them out of business.

To be clear, LifeLock won't do anything for you that you can't do for yourself and ACCESS doesn't advocate their use. But as one of our own board members has pointed out, there is a value to be placed on free time. Because of this, there may be times that we all choose to pay for services that will save us time.

What LifeLock does for its customers is place a free fraud alert on their credit accounts. The ability to place a fraud alert on your personal credit report is a right that is guaranteed by the Fair Credit Reporting Act (FCRA). Typically, fraud alerts last for a period of 90 days but consumers can renew them every 90 days. This means that a fraud alert can be permanent as long as you remember to renew it each time it is about to expire. That's where LifeLock comes in. They remember for you.

Once a fraud alert is placed on a credit file, merchants opening new lines of credit using that file are notified. In theory, the merchant is supposed to double check and make sure that the person opening a new account is actually not an imposter.

LifeLock also removes consumers from most junk mail lists. Again, this is something that anyone can do for themselves by contacting the Direct Marketing Association.

Until now, LifeLock has been tolerated by Experian and other credit reporting agencies because they are relatively small. But the company has been growing rapidly and now has 600,000 subscribers who pay them $110 each annually. And according to Experian's lawsuit, LifeLock is now costing them millions of dollars each year.

In its lawsuit, Experian claims that LifeLock is using fraud alerts in a way that was never intended by Congress when the FCRA was passed. It make the disingenuous claim that because of the number of fraud alerts that LifeLock is responsible for, merchants will begin to ignore them.

The suit notes that every time a fraud alert is placed on a consumer's credit account, it costs Experian money because the alerts are placed using Experian's 800 numbers. These are toll free numbers for consumers to use, but which Experian pays for the cost of the call.

Experian also notes that every time a fraud alert is placed on a consumer credit account that Experian has to generate certain paperwork that has to be sent out via regular mail. Fraud alerts also entitle the consumer to an additional free credit report. All of this costs Experian money.

The suit appears to turn on a single phrase in the FCRA; "good faith". The FCRA clearly allows consumers to appoint a person or company to place a fraud alert on their credit file. But the clause that allows this also states that anyone placing a fraud alert on a particular file must have a "good faith suspicion that the consumer has been or is about to become a victim of fraud or related crime, including identity theft..." How the courts will eventually decide this case will be interesting to watch.

Experian's motive in filing the suit is pretty clear. LifeLock is now affecting their revenue. It is quite likely that LifeLock is now impacting the sales of credit monitoring services sold by Experian.

ACCESS will continue to follow this case as it moves through the courts.

by Jim Malmberg

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