More on LifeLock's failure to protect identities (and its claim that it isn't so!)

More news reports have surfaced about the apparent identity theft using the information of Todd Davis, the CEO of LifeLock. Why is his identity theft newsworthy? Because his Social Security number has been blasted in LifeLock's advertising campaigns, in an attempt to give consumers the impression that the LifeLock service is so effective, he doesn't care if anyone knows his social security number.

A couple of weeks ago I posted an article here questioning whether the service works, or if it's really just a scam, bilking consumers out of their money and their trust.

The more recent news reports say that people have applied for driver's licenses using Todd Davis's Social Security number at least 20 times. And they say that Davis even admitted in an interview with The Associated Press that there have been at least 87 attempts to steal his identity, with one of them in Texas being successful. The conclusion that some draw from this? The LifeLock services don't really protect consumers.

There's little doubt that the CEO of the company can and should receive the best that LifeLock has to offer, yet his identity is still not safe. He counters that there is no negative information on his credit report as a result of any identity theft, so the service clearly works.

And the company is getting mad. It sent out a press release today saying that Davis is confident in LifeLock's services and that people are lying about the situation. Todd Davis is even going on the Today Show tomorrow morning to try to refute the claims made against the company.

The press release says in part: "Recent claims have suggested that Davis' social security number has been used at least 20 times to obtain drivers licenses and other credit. Davis explained, "These claims are completely untrue and reflect total inexperience and lack of understanding of how credit files and identities work. While there have been more than 100 attempts to use my identity information, none of these recorded in the credit files resulted in any loss for me. However, a check cashing company failed to properly follow procedures and verify the identity of a thief in 2007, resulting in a person being able to cash a check for $500. Let's be clear, there is currently no form of identity protection that would prevent this from happening, but this is why LifeLock serves such an important protection for consumers. The LifeLock guarantee served me as it serves all LifeLock members, what identity theft LifeLock can't prevent, it will fix at LifeLock's expense up to one million dollars."

Some consumers may read that statement and say, "See, the lawyers have it all wrong. LifeLock really is a good service." I read it a little differently. To me, LifeLock is admitting here that its services can't really protect your identity because there are so many types of financial transactions that happen outside of what it's offering. That means its service is virtually worthless.

You should also know that class action lawyers don't agree with the characterization of the LifeLock "guarantee." They say that the guarantee is worthless too. While the company tries to make it sound very inclusive, the lawyers say the contract with LifeLock only guarantees to help consumer when an identity theft happens because of a "defect in the service." They say that guarantee isn't worth the paper it's printed on.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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