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Foolproof way to prevent I.D. theft? Nope

For $10 a month, LifeLock offers “a proven solution that prevents your identity from being stolen before it happens.” But the company has been hit with a lawsuits.
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Todd Davis is a super salesman with a mighty convincing pitch. You may not know his name, but I bet you’ve seen his ads for LifeLock. Davis, the company’s CEO, gives out his real Social Security number to prove his confidence in Lifelock’s identity theft protection service.

“The advertisements are bold, but the protection is less than you would expect,” notes Jeff Blyskal, senior editor at Consumer Reports. “It creates the false impression that you don’t have to worry about ID theft; just do what you want, you can even be careless.”

But clearly you shouldn’t do what Davis does. In fact, the LifeLock terms and conditions agreement states, " agree that you will not purposely engage in behavior that will put your personal information at unnecessary risk, such as leaving your PIN or passwords in obvious places or publishing your Social Security Number."

So what is LifeLock?
For $10 a month or $110 a year, LifeLock offers what it calls “proactive identity theft protection.” According to its Web site, the company provides “a proven solution that prevents your identity from being stolen before it happens.”

It backs up that claim with a “$1 million total service guarantee.”

How does LifeLock protect you from identity thieves?  It puts a “fraud alert” on your credit files at the big three credit bureaus – Experian, Equifax and TransUnion – and renews that alert every 90 days. The company also contacts the Direct Marketing Association to remove your name from pre-approved credit card offers and provides you with a free copy of your credit report each year. Of course, you can do all this yourself – for free.

Davis agrees he’s selling convenience and he readily admits LifeLock isn’t foolproof. “No system can stop your identity from being stolen.” But he says that the million dollar guarantee is there should something go wrong. “We actually accept the burden of resolving the issue, hiring whomever we need to hire, engaging whatever experts we need to resolve the problem for you.”

Do fraud alerts work?
A 90-day fraud alert flags your credit file. It tells a potential lender you suspect you are or could be the victim of identity theft. This should make them more careful when someone applies for a new credit account in your name, requests a new card for one of your existing accounts, or tries to increase the credit limit.

On its Web site, LifeLock says it wants to “lock down every individual’s private information” so no one else can use it. But a fraud alert does not lock your credit file. And it’s far from perfect.

According to the advocacy group Consumer Action, fraud alerts are only effective in about 75 percent of the cases. The only way to restrict access to your credit file is with a credit freeze, something LifeLock does not do.

Lawsuits and more lawsuits

In February, Experian (one of the big three credit reporting agencies) sued LifeLock, claiming its use of fraud alerts is illegal. The Fair Credit Reporting Act limits a 90-day fraud alert to someone who “asserts in good faith” a suspicion that he or she “has been or is about to become a victim of fraud or related crime, including identity theft.” Experian says it does not believe all of LifeLock’s 1.3 million customers meet that requirement. But according to LifeLock's terms and conditions agreement,  by becoming a member, "You certify that you have a good faith suspicion that you (or your child you have enrolled) have been or are about to become a victim of fraud or related crime, including identity theft ..."

Davis countersued Experian and insists LifeLock is “100 percent within the spirit of the law.”

LifeLock also faces consumer lawsuits in at least seven states. These complaints claim the company uses “fraudulent advertising,” and makes “false, deceptive and misleading statements.”

“LifeLock cannot provide the protection it says it provides,” says David Paris, the attorney who filed suit against LifeLock in Maryland, West Virginia, California, Texas, Florida, and New Jersey. “The company’s ads lull people into a false sense of security. They are paying for a service they are not getting.”

Attorney Leonard Aragon filed suit in Arizona because LifeLock is headquartered there. “There is no million dollar guarantee,” he insists because of all the fine print – restrictions, waivers and limitations – in the contract.

The terms and conditions clearly state LifeLock is only responsible to “cure the failure or defect in our service.” The company will not pay for lost wages or profits, loss of business, or lost opportunities. And it will not reimburse any fees you spend for professionals or other service providers “unless we choose those providers for your particular matter.”

Davis says his customers don’t need to worry about the fine print. He told me it’s only there to satisfy state and federal regulators. “It’s not about us trying to get out from our responsibilities,” he assured me. But as any lawyer will tell you, clauses are put into contracts for a reason. And when push comes to shove, it’s the contract not the advertising claims that count.

Davis says 329 people have invoked the guarantee so far and they have all been taken care of. “I do not have anybody suing me because I did not honor the guarantee,” he says.

My two cents
The courts will ultimately decide if LifeLock is operating within the law. But there’s no question Davis is being incredibly reckless by using his Social Security number in advertisements.

Here’s something the ads don’t tell you. LifeLock did not prevent Davis from becoming a victim of identity theft. In fact, a man in Texas got a $500 pay-day loan using Davis’ Social Security number. How could that happen? Davis says the loan company did not use one of the major credit bureaus, so they did not know about the fraud alert.

Davis says there have been almost 100 other unsuccessful attempts to steal his identity. He admits he can’t be sure someone hasn’t used his SSN to get a driver’s license or perform some other transaction that doesn’t require a credit check.

Fact: There is nothing you, LifeLock, or any other paid service can do to completely prevent identity theft. The best you can do is minimize your risk.

Is LifeLock worth the money? Not to me. I already told the Direct Marketing Industry I don’t want junk mail and I opted out of pre-approved credit card offers. That took less than five minutes and didn’t cost me a penny. Next, I plan to put a freeze on my credit file. I’ll have more on that in a future column.

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