Fraud Files: LifeLock Barred From Lying to Consumers

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LifeLock is a company famous for advertising "identity theft protection services" and its "million dollar guarantee" by printing the Social Security number of its CEO Todd Davis all over the place. What the company failed to tell consumers was that Davis's identity wasn't as safe as they wanted you to believe, and there have been numerous attempts to steal his identity, at least one of which was successful.

This month, the Federal Trade Commission and LifeLock entered into a settlement agreement which required LifeLock to pay $12 million and quit lying about their services. What's funny is the difference in spin between LifeLock and the FTC. While LifeLock spins this as a good "agreement" between them and the agency, which will put in place advertising standards for their whole industry, the FTC makes it clear that this settlement is a result of LifeLock making false claims in its advertising. Specifically, the FTC says that LifeLock "... used false claims to promote its identity theft protection services, which it widely advertised by displaying the CEO's Social Security number on the side of a truck."

The company has had a checkered past: Robert Maynard, one of the co-founders, was at the heart of some sketchy dealings before starting LifeLock. The company eventually distanced itself from him in an effort to put those questions behind it. But everything has not been smooth sailing since then.

Promised "Protection" Has "Holes That You Could Drive a Truck Through"

I've written articles on the Fraud Files Blog and at DailyFinance's sister site, WalletPop, about my thoughts on LifeLock's so-called identity-theft protection services. I never really took issue with the coreservice the company provides: It will put fraud alerts on a consumer's credit profile with each of the credit reporting agencies for a small monthly fee. There is nothing inherently wrong with consumers paying for this service, so long as they realize this is something they could do themselves for free.

What I always took issue with were the promises the company was making. I've never liked the way LifeLock pretends your identity is safe because of its service. The company does little more than a consumer can do on her or his own. Beyond the fraud alerts, LifeLock now also goes through public records databases and tells customers of the postal addresses, dates of birth, and Social Security numbers on file in those public records. There's nothing revolutionary nor inherently valuable to consumers in providing this.

The FTC, too, is entirely unimpressed with LifeLock's ability to protect you from identity theft. "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," it said in its press release about the $12 million settlement. Now that's a ringing endorsement if I ever heard one.

And don't think that LifeLock was merely engaging in some creative wordsmithing in its advertising. The company got in trouble because it made absolutely outrageous and false claims like:
  • "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."
Sure, the fraud alerts on your credit report can do some good, but there are all sorts of ways identity theft can happen which aren't addressed by LifeLock's services. The FTC says the company's services do nothing to prevent common types of identity theft like misuse of existing accounts, medical identity theft, and employment identity theft. The FTC also says LifeLock was lying when it said that a customer would always get a phone call before a new credit account was opened in their name, and that it would constantly monitor activity on its customers' credit reports.

Guarantee Is a Million Dollar "Maybe"


One thing not addressed by the FTC is the LifeLock "million dollar guarantee," which is essentially worthless to consumers, in my opinion. If you take a look at the details of this "guarantee," you'll see that all it really guarantees is that LifeLock probably won't have to help you repair your credit if your identity is stolen. The company posts the guarantee here, but then you need to click through to get to the page with even more exclusions and limitations.

Read carefully this statement about LifeLock's guarantee: "But if you become a victim of identity theft while you are a LifeLock member because of some failure or defect in our service, contact us and we will act on your behalf to repair any damage. We will spend up to $1 million to hire lawyers, investigators, consultants and whatever else it takes to restore your name and help you recover the direct losses from the identity theft."

I've boldfaced the most damning portion: LifeLock is only obligated to help you if your identity is stolen because of a "defect in their service." Can you think of any situation which would qualify? What if someone steals your wallet? Steals your mail out of your mailbox? Steals your credit card number while you're paying for your meal at a restaurant? None of these situations has anything to do with LifeLock and its service of putting fraud alerts on your credit files. If you can think of a situation which would qualify as a "defect in its service," I'm all ears, but I haven't thought of one yet. And if it's not LifeLock's fault, LifeLock isn't going to help you.

You should also carefully note that in the terms and conditions, LifeLock says it will help you recover your costs and losses related to the fraud. However, they will not actually repay you for any losses, per the fine print. So even if LifeLock agrees to help you with your identity theft, they won't actually pay you any money. Their "million dollar guarantee" is only good to the extent that it may help pay others to investigate or help you correct your credit report. (And again, that's if they even agree that you qualify under their guarantee.)

All in all, I find almost no redeeming qualities in LifeLock as a company or as a service for consumers. The FTC had some harsh words for the company, and that's saying a lot. There are tons of scams and questionable schemes out there which the FTC never gets around to looking at. They took their time on this one, and consumers ought to heed their warnings about the company.
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