Lifelock – Don’t Make Promises You Can’t Keep

The identity-theft prevention company Lifelock is so confident its system works, it offers a $1 million guarantee to its customers. The CEO of Lifelock backs up his claim by publishing his own US Social Security number, daring thieves to steal his identity.

An excellent plan with only two minor drawbacks.

First, the methods Lifelock uses, including requesting fraud alerts from credit bureaus, can be carried out by any consumer. True, charging someone for a service they could do themselves is common, as common as charging for oil changes or window cleaning. There’s nothing wrong with a service-based business. Lifelock simply takes the hassle out of doing it yourself.

The problem is, the Fair Credit Reporting Act that requires consumer reporting agencies to process fraud alerts speaks of “the direct request of a consumer, or an individual acting on behalf of or as a personal representative of a consumer.” There doesn’t seem to be any allowance for a business, such as Lifelock, to act in this role. This is the basis for a law suit launched by the credit bureau Experian against Lifelock. In some cases, according to Experian, Lifelock’s employees have actually claimed to be the consumers for whom they’re requesting the alerts. If this is true, wouldn’t that be, in a sense, identity theft, albeit for an innocuous purpose?

Further, the fair credit reporting act specifies that alerts can be requested by a consumer “who asserts in good faith a suspicion that the consumer has been or is about to become a victim of fraud or related crime.” Lifelock’s practice is to activate fraud alerts as a matter of course, a proactive measure, for all its customers, clearly not as a special action under imminent danger of fraud as the act seems to imply.

Once the initial fraud alert has been enabled, Lifelock then renews the alert every 90 days. Using this process, Lifelock has placed hundreds of thousands of alerts into Experian’s files, something Experian claims is illegal.

The second drawback to Lifelock’s system is that it simply may not work as well as advertised.

Todd Davis, the CEO who dared criminals to steal his identity, admitted to the Associated Press that at least one of more than 80 attempts to do so has succeeded. A man in Texas convinced an online Payday Loan Company to give him $500 when he posed as Davis, using the CEO’s Social Security number.

Attorneys for consumers suing Lifelock claim that this is proof the company can’t provide the degree of protection it advertises. Lifelock counters that this is only possible because companies like the online payday loan operation didn’t work with one of the three major credit bureaus Lifelock uses.

Isn’t that the point? A courier company may guarantee deliveries on time. But it can’t foresee or control all influencing factors like the weather and traffic. That’s why their guarantees promise a refund equal only to what their customers paid. Lifelock has issued a million dollar guarantee in the face of factors it can not control.

Lesson: Don’t base your business plan on a system that requires you to break or even bend the rules. Don’t promise something you can’t deliver or that depends on factors you can’t control.