In a federal lawsuit filed last week in California, London-based Experian Group alleges that fraud-alert company, LifeLock, is defrauding consumers and violating the Fair Credit Reporting Act by selling services that are otherwise free and abuse the fraud-fighting tools the government enacted with the FCRA.
In its suit, Experian charges that LifeLock is illegally posing as the consumer when requesting an initial fraud alert, and conducting a “scheme” to “game the system” by adding new alerts every 90 days so that the consumer’s file is maintained in a perpetual state of alert , which inhibits lenders from extending credit without a follow-up to the consumer. Experian argues that issuing four credit alerts a year for 600,000 plus customers is like crying wolf, degrading the effectiveness of fraud alerts and sticking a costly burden on credit reporting agencies. Alerts are only for those who worry about identity theft from a data breach, property theft or other tangible compromise, according to Experian.
LifeLock, which had not filed a response to the lawsuit at press time, has found a receptive market. Besides its customer load, the company has landed key partnerships with firms like Fifth Third Bancorp and Jack Henry & Associates. It also has received financial backing from Goldman Sachs, which constitutes a virtual Good Housekeeping seal of confidence from the investment community.
Part of Experian’s suit also cites LifeLock for allegedly failing to disclose to consumers they could do fraud alerts themselves at no cost (Experian calls this “deceptive”). But critics point out that Experian runs FreeCreditReport.com, a subscription site that itself had to settle Federal Trade Commission charges in 2005 for deceptive marketing practices that confused consumers into thinking they were getting the free annual credit reports authorized through the unrelated (and truly free) annualcreditreport.com site. “The fact that Experian is suing LifeLock for not protecting consumers is a little disingenuous,” says Gartner analyst Avivah Litan. “Its mission is making money.”
