The FTC agreed with us and most identity theft experts that Lifelock mislead the public with its advertising campaigns.

“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz.

As part of the settlement - one of the biggest ever - Lifelock are barred from making more deceptive claims about their product.

Some of the claims Lifelock made which the FTC took exception to included:

• “By now you’ve heard about individuals whose identities have been stolen by identity thieves . . . LifeLock protects against this ever happening to you. Guaranteed.”
• “Please know that we are the first company to prevent identity theft from occurring.”
• “Do you ever worry about identity theft? If so, it’s time you got to know LifeLock. We work to stop identity theft before it happens.”

The FTC found all of the above false and misleading. The most common form of identity theft is the misuse of existing bank and credit card accounts. The FTC correctly argued that the fraud alert placed by Lifelock did absolutely nothing to protect these accounts.

Cases of identity theft where the criminal opens new accounts in the name of their victim accounted for just 17% of all identity theft cases according to the FTC and while having a fraud alert in place would help against this type of attack it in no way guaranteed you protection.

The FTC further complained that Lifelock’s claims that it ‘constantly monitors your credit file’ that it ‘would prevent unauthorized changes to your address information’ and that ‘you will always receive a phone call before any new line of credit is opened’ were all false.

Lifelock were also found woefully short in the claims they about protecting customers data. During the sales process Lifelock customers were told that:

• “Only authorized employees of LifeLock will have access to the data that you provide to us, and that access is granted only on a ‘need to know’ basis.”
• “All stored personal data is electronically encrypted.”
• “LifeLock uses highly secure physical, electronic, and managerial procedures to safeguard the confidentiality and security of the data you provide to us.”

All 3 statements were found to be false and misleading.

None of the data customers supplied (including social security and credit card details) was encrypted. The information was freely available to all staff members instead of a strict need to know basis and the software used by the company was found to be highly vulnerable to attack.

As well as the $11 million to the FTC Lifelock will also pay a further $1 Million to a group of 35 state attorneys general.

The FTC will use the $11 Million to refund customers. They are to send out letters to past and present customers who fell victim to the great Lifelock scam.

In addition to LifeLock being barred from misrepresenting the value of the Lifelock service the FTC also extended it to include co-founders Richard Todd Davis and Robert J. Maynard, Jr.

As reported on this site several times,Todd Davis knew full well his identity had been stolen over 20 times yet continued to show his social security number to the public claiming it was safe to do so because his company would protect his identity.

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The fraud alerts are the center piece of the Lifelock identity theft prevention service. The problem for Lifelock is that they were designed for individuals to place on their own credit file should they have reason to believe they may be at risk from identity theft.

A lost wallet or missing post would be cause for concern. A quick phone call to one of the credit bureaus and for the next 90 days if anyone tries to take out a new line of credit, the company offering the credit have to show extra vigilance in confirming the person really is you. This is the sort of situation the Government envisaged when they came up with the idea of fraud alerts.

What Lifelock did was automate the process by hiring ‘home workers’ to place the fraud alerts on masse, over 100,000 times a month to me more accurate. They had over 1.5 million Americans sending them $10 a month to make a toll free phone call 4 times a year!

This placed enormous pressure on the system and cost Experian millions a year in extra work and equipment to try and cope with the growth of Lifelock.

Maybe if Lifelock had offered to share some of their ‘easily made profits’ with the company actually doing the work for them, Experian wouldn’t have spat the dummy out and seeked legal intervention.

Lifelock have had a checkered life. Built on seed money from investors which was used to set up aggressive marketing campaigns, they have several court cases still outstanding.

Their (in)famous guarantee is the center of several class actions thanks to the small print revealing they will only pay out the costs of correcting your credit file and not for replacing any money lost. It also states the guarantee only comes into play if the identity theft is a result of a ‘failure or defect of our services.’

As the only real service they provided (before the court ruling) was to ask Experian to place a fraud alert on your file, good luck proving your bank account has been emptied due to a Lifelock fault.

It was also discovered that the social number Todd Davis showed off as a way to prove his company worked, had in fact been used to illegally obtain at least 20 driving licenses in his name as well as someone using it to take out a payday loan.

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Judge Andrew Guilford ruled that while the Fair Credit Reporting Act allowed fraud alerts to be placed by individuals, it did not allow companies to do so.

“Experian argues that by using the term ‘consumer’ rather than ‘person’ in (the FCRA), Congress expressly excused Experian and other credit reporting agencies from placing fraud alerts requested by companies like LifeLock.”

“The court finds that this is a proper interpretation of the plain meaning of the statute” the Judge said.

Experian filed the case against Lifelock as it’s extremely miffed at the fact that it is doing Lifelock’s work for them.

The only meaningful thing Lifelock do is a to place a fraud alert on a customers file. The fraud alert was designed to be used should you feel you are at a risk, lost your credit card, post keeps going missing etc.

Lifelock have so far requested fraud alerts for over 1.5 million customers and this is creating a huge amount of work for Experian and the other 2 credit bureaus, work Lifelock is happy to charge for but not pay for.

The ruling will have huge ramifications for LifeLock and other similar companies who have been using the loop hole which allows them to charge a customer for a service which is freely available at any of the 3 major credit bureaus.

Experian and the other credit bureaus are happy for you to place a fraud alert yourself but experts have warned for some time that their value is limited.

A fraud alert may warn you if a new line of credit is opened in your name, ie. someone signs to buy a new TV on credit or signs up for a new credit card offer but it does nothing to protect credit cards you already have or bank accounts being emptied of your savings.

Neither does it prevent someone using your name to obtain a driving license (there are at least 20 illegal licenses is circulation all in the name of Todd Davis and all obtained by using his social security number although he forgets to mention that in the Lifelock commercials).

Lifelock are also facing class action lawsuits from former customers who claim the 1 million guarantee is worthless.

The guarantee states a customer is covered only if an identity theft happens due to a failure of its service. As the only service Lifelock provide is to place a fraud alert, customers who end up being victims are unable to claim on the guarantee.

Most of Lifelock’s competitors announced they would be dropping the fraud alert service and concentrating on credit monitoring in light of the court ruling.

Lifelock CEO Todd Davis though said it would be ‘business as usual’ and with their current customers sending them a collective $10.5 Million each month they are sure to keep going as long as possible.

This is despite the fact new customers signing up will be unaware they are paying for a service Lifelock will soon be unable to deliver.

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“I am well aware it is possible to carry out the identity theft prevention measures myself thank you very much but as Lifelock only costs me a few dollars a week why should I?”

Well, the main reason is because you are not getting the service you think you are paying for but first lets consider those few dollars a week for a moment.

Lifelock charges $10 a month, which of course is $120 a year. For your $120 you get a fraud alert placed on your credit file and it gets renewed every 3 months on your behalf and you get your (free) annual credit report.

It takes 2 minutes to make the call (I know because I do my own) but lets be generous and say it takes 5. So we have someone making a 5 minute phone call on your behalf 3 times a year which equates to 15 minutes work per year for a total cost to you of $120

I don’t know you and for all I know you may well be comfortable paying rates of $480 an hour to someone for making a couple of toll free calls but I’m guessing that in today’s economic climate, you’re not.

Before we look at the finer details of what you get for your money, there is one other point for you to consider about the $10 a month Lifelock charge for their service and its this:

The average out of pocket cost for identity fraud victims is $422 so were you to sign up to Lifelock and fall a victim to the crime any time after your first 3 years, you would actually be out of pocket even if they were to reimburse you in full (more on the very dodgy Lifelock guarantee).

Cost of Lifelock for 4 years = $480. Cost of being a victim = $422.

So, if getting value for money is not your thing and you still consider Lifelock to be worth it, lets look at exactly what you get for your bucks.

Your Free Credit Report

Lifelock request on your behalf, your free credit report. You are entitled to 1 free copy a year from each of the 3 major credit bureaus and if you prefer you can get immediate access to your file online, again at no cost from www.annualcreditreport.com

Tip: Get one from each of the credit bureaus every 4 months rather than request all 3 at once so that you can spot any unusual activity sooner rather than later.

Your Fraud Alert

Lifelock place a fraud alert on your credit file so that (in theory anyway) should someone try and take out a new line of credit in your name the credit company should use what the law calls “reasonable policies and procedures” to verify your identity before they open a line of credit in your name. Though as Todd Davis, the CEO of Lifelock found out when someone took out a $500 payday loan out in his name, not all credit companies bother to act on the fraud alert as it slows down the whole process of making money.

Slowing down the loan process is one of the reasons Experian is currently suing Lifelock. They claim a fraud alert should only be placed if a person can show they are at risk from identity theft, ie. lost their wallet or purse. If successful in stopping Lifelock through the courts, Lifelock’s entire business model goes down the pan but that’s a story for another day.

Anyway, your fraud alert: Placing your own fraud alert takes a few minutes and costs nothing. You only have to place it with one of the bureaus as by law the one you place it with must inform the other 2.

To find out just how easy it is simply ring or write to either of the following credit bureaus to request a fraud alert to be placed on your credit file:

TransUnion: 1-800-680-7289;  Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92834-6790

Equifax: 1-800-525-6285;  P.O. Box 740241, Atlanta, GA 30374-0241

Experian: 1-888-EXPERIAN (397-3742); P.O. Box 9532, Allen, TX 75013

An ‘initial’ fraud alert is designed to be used if you feel you are at risk so if asked for a reason you might mention the wallet or purse that you lost or the ‘post that has been going missing.’

You are also entitled to a free copy of your credit report when placing a fraud alert so if you haven’t already, request one at the same time.

Your fraud alert lasts for 90 days and this is the only possible value to my mind that Lifelock offers: They renew it for you once the 90 days is up but nowadays every cell phone has a calendar built in as do all PC’s. Set a reminder for 90 days and then contact the next credit bureau in the list and place the alert again.

If you have been a victim of identity theft and have a police or other law enforcement agency report to prove it you can place an ‘extended’ fraud alert which stays on your file for 7 years and requires any credit company to contact you via phone and  in person before opening any new line of credit.

That’s the bases just about covered. As you can see, you don’t get anything from Lifelock that is not available to you within a few minutes and for free. They use smart marketing methods and prey on people’s worries to get over a million Americans to pay them over $10 million a month for what is nothing more than a very expensive alarm clock.

Don’t fall for the Lifelock scam, instead of spending $120 a year for the rest of your life, take the 5 minutes it costs to do it yourself.

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Here’s the wording of the Lifelock guarantee:

“If you are our member when someone accesses your personal identifying information and subsequently uses it without your authorization to commit a fraud, due to a failure or defect in our Service, and you have complied with this Agreement, subject to the terms herein, we will pay professionals to assist in restoring any such loss or recover such expenses, as required, provided however that the maximum limit of our Service Guarantee is $1 (one) million per lifetime for all incidents in the aggregate.”

The bit you need to pay attention to is the ‘FAILURE OR DEFECT IN OUR SERVICE’ part.

As the only meaningful service they actually provide is to request a fraud alert to be placed on your file, what they are actually saying is you are only covered by their guarantee IF they forget to place the fraud alert and as a direct result of that you have your identity stolen.

If the lender ignores the fraud alert (as happened to Lifelock CEO Todd Davis when someone used his social security number to take out a payday loan) or tries to ring the contact number left on file but gets no answer so chooses to proceed and gives out a line of credit to someone using your name fraudulently, that is not the fault of Lifelock so you are not covered by the terms of their guarantee.

There are currently several class action lawsuits against the Lifelock guarantee such as the case of 25 year old Nathaniel Faulhaber of Parsonsburg, Md., who signed up to LifeLock in May 2007 only to later find out that an identity thief had applied and obtained a total of five credit cards in his name — all while he was supposedly under LifeLock identity theft protection.

His Lawyer said: “Not only did the primary service not work, but he also found the LifeLock guarantee to rectify any defect in that service to be useless. LifeLock and the third party entities it employs have provided so little meaningful assistance to Faulhaber that, ironically, he now finds himself in the same situation he would have been in had he never paid LifeLock a dime.”

The guarantee is just another part of the Lifelock scam designed to get you to join the other 1 million plus users who now hand over a cool $10 million a month in the belief that their identity is under protection and should a criminal still manage to steal their identity, the guarantee will ride to the rescue and make everything right.

Wrong! For a start, good luck trying to prove any criminal act against you was as a direct result of a Lifelock defect. The fraud alert they place on your behalf simply recommends any loan or credit company should use “reasonable policies and procedures” when someone requests a new line of credit.

It doesn’t stop the waiter you didn’t tip last night taking the details of your existing credit card that you used and going on a spending spree.
It doesn’t stop anyone emptying your existing bank accounts.
It doesn’t stop someone using your name to get a job and then stealing from the company.
It doesn’t stop someone giving your name to Police when stopped and questioned.
It doesn’t stop someone giving your name at the hospital after getting treatment and committing medical identity theft.
It doesn’t stop the lender ignoring the fraud alert because they want to make the sale.

It doesn’t do much really, a bit like the Lifelock guarantee.

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Because they get paid by Lifelock to recommend them, that’s why.

Lifelock pay $35 for every customer website owners send them and they don’t care too much about what those sites say or do to make the sale so please don’t contact me telling me that some identity theft guru or self proclaimed consumer watchdog expert somewhere is singing the praises of Lifelock because they aren’t, they are just making an easy $35.

Lifelock can afford to pay website owners $35 per customer because the average value of a customer to them is around $600 so it makes good business sense (Lifelock estimate customer lifespan to be 60 months).

There’s nothing wrong either with this type of marketing as a business model and many other companies run similar programs, Amazon being the largest and most successful at it I would guess.

The difference is that when a site for example is discussing the theory of ‘the big bang’  and its owner recommends a book by Stephen Hawking you pretty much much know what you will be getting in the post should you decide to click on his link, buy the book and earn the web site owner his small commission.

On the other hand, when some internet marketer sets himself up as an identity theft or personal security expert with a professionally designed site and starts telling his visitors that they ‘need’ Lifelock, he is doing so to make himself money and he more than likely doesn’t care whether Lifelock is a scam or not. All he wants is for you to click on the link and make him his $35

With the Lifelock ad campaigns running nationally with their false promises of ‘total protection’ it’s an easy sale for the internet marketer and it used to be even easier until Lifelock were threatened with a lawsuit for allowing their army of paid ’supporters’ to intercept the search engine users looking for other, less aggressively marketed identity theft protection companies.

Here’s what David Ridings, the CEO of one of those competitors -Namesafe - said at the time (June 08) they uncovered the scam:

“We have discovered that LifeLock has been sponsoring advertisements on most major search engines including Google, Yahoo, Lycos, MSN, Dogpile, and AOL, that deceptively led consumers to Lifelock.com. Specifically, when you searched ‘Namesafe.com’ in any major search engine, you found an advertisement that said ‘Namesafe.com’ but when you clicked on it, you were not directed to the official site for NAMESAFE, but rather to our competitor, LifeLock.com”

Anyone else see the irony of an identity theft protection company stealing another companies identity?

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Having at least 20 criminals running around with driving licenses in his name which they got by using the said social security number is a small price to pay while ever the ads are convincing more and more folk to keep sending him those ten dollars monthly.

The proverbial seemed to hit the fan though when someone took out a $500 payday loan in his name and the first Todd Davis knew of it was when the loan company started chasing Davis for non payment. Not good at all when your entire marketing campaign is based on convincing people how safe their personal information will become once they start sending in their $10 a month to Lifelock.

Once news of the payday loan broke, a lawyer did a bit of digging and uncovered the 20 odd driving licenses all issued to people using Todd Davis’ personal information. He also found that one identity theft criminal had a sense of humor and had actually changed the date of birth associated with the social security number to Nov. 2, 1940 making Todd Davis age to appear (inaccurately) to be late 60’s.

The questions and class action lawsuits started coming thick and fast as quite clearly those identity theft ads done by Todd Davis were being shown to the public even though they (the company) knew the product was flawed.

It wasn’t just disgruntled consumers and class action lawyers who raised eyebrows at the ads once news broke that Todd Davis’ identity had been seriously breached either: State agencies in both New York and Montana are also investigating the Lifelock advertising campaigns.

The whisper is the Todd Davis campaign is coming to an end because when people hear or see it and Google the social security number (457-55-5462), instead of finding the company ranked number 1 they find it buried under lots of news stories about the pending lawsuits.

Many consumers who believed the ads but are now learning the truth about Todd Davis’ social security number are seeking recompense. If you are a past or present Lifelock user you can get more information from the lawyers handling the cases by visiting their site here.

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“We’re pleased the court consolidated these 13 cases allowing us to efficiently move claims forward and help correct these wrongful practices,” said lead attorney Rob Carey. “This is a first victory for plaintiffs, and the fact that several top-tier firms recognized LifeLock’s conduct is deficient indicates we have a strong case - we look forward to preparing for trial.”

Cases from around the country make up the 13 suits moving forward, including plaintiffs from New Jersey, Arizona, Maryland, Illinois, West Virginia, Florida, Texas, and California.

The suits claim that LifeLock uses aggressive advertising to entice consumers to sign up for its $10 a month service knowing that the sevice it offers is flawed because the social security number they use in the ads has been used to illegally obtain at least 20 driving licenses and a payday loan in CEO Todd Davis’ name.

As you are probably aware, Lifelock describes it’s service as “proactive identity theft protection, offering a proven solution that prevents your identity from being stolen before it happens.”

The lawsuit further claims that the LifeLock “proven solution” that it heavily and aggressively markets consists of illegally placing and renewing fraud alerts under consumers’ names with the credit bureaus.

It seems that under the federal Fair Credit Reporting Act, corporations such as LifeLock are not allowed to place fraud alerts on a consumers’ behalf and further more according to the complaint, the law was written so as to specifically prevent credit repair companies from improperly using fraud alerts.

Through the lawsuits plaintiffs also claim LifeLock miss-states its legal obligations to customers and what its protection service covers if a loss occurs. In marketing campaigns the company touts a $1 million guarantee, yet a closer examination at the fine print reveals that LifeLock will not pay any losses directly to the consumer and does not cover consequential or incidental damages to identity theft, plaintiffs claim. You can read more on that more than a little misleading Lifelock guarantee.

The first and original suit filed by HBSS claims LifeLock violated Arizona’s Consumer Fraud Act and the Arizona Insurance Code, and seeks to have all members’ fees refunded due to the illegality of the contract and LifeLock’s misrepresentations about its service.

Are you a Lifelock customer present or past? Click here to join this suit and learn more about the case.

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The fraud alert they place against your name can help bring attention to someone trying to open a new line of credit in your name but it does nothing what so ever to protect any credit cards, bank accounts etc. that you currently have and it certainly does not stop a criminal ‘wreaking havoc with your good name’ by using it to obtain employment and then stealing from the company.

Another problem though that Lifelock could be causing with the masses of fraud alerts they are continually placing on their customers credit files is a real danger that fraud alerts become the ‘norm’ and as such their use gets very much watered down.

The law states that when a credit firm sees a fraud alert on a credit file it should use “reasonable policies and procedures” to verify the identity before they open a new line of credit. With more and more credit files having the fraud alert though, credit bureau Experian say there is a real danger the loan and credit industry will become immune to the fraud alert and simply start ignoring them.

They are so worried this could happen they are asking the courts to stop Lifelock from placing them on their customers behalf which if successful would see an end to Lifelock as its entire business is based around placing these free fraud alerts on their customers behalf.

You can place your own fraud alert and get your credit report without paying Lifelock for the privilege simply by using the links in the right hand column. Be aware though that identity theft prevention requires much more than these few simple steps.

Purchase a lockable mail box, get a good shredder, don’t carry your social security number with you. These and other common sense precautions will do far more to prevent identity theft.

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