Oct 27 2009

Positive for Lifelock, Experian, a loss for consumers

Fraud alerts on your credit cards are one of those really useful tools that have been put in place by law, only to be neutered by the same law.  They’re great in that they put a lock on your credit scores and let you know when anyone is trying to open an account in your name, but at the same time they’re incredibly hard to use because you have to fill out paperwork every three months.  There is an extended fraud alert that will protect you for a period of seven years, but in order to qualify for that, you have to provide a police report proving that you’ve been targeted by identity theft.  To top off the insult from the credit reporting companies, you have to file separate fraud alerts with each company and maintain them yourself if you want to be relatively safe.

Enter Lifelock; for a small monthly fee they would maintain your fraud alerts for you and even provide a number that creditors could call in order to unlock your credit ratings.  This was great for consumers, it let them keep their credit scores locked so that it was that much harder for someone to open an account in your name or for the credit card companies to review your credit score and send your monthly junk mail offerings.  This a big win for us, but it cuts into the major source of the big three credit scoring companies, Experian, TransUnion and Equifax.  If too many people keep their credit scores hidden, the scoring companies can’t sell their big lists of names, or at least those lists lose some of their value.  So in 2008, Experian sued LifeLock to block the practice and won.  Experian and LifeLock have settled the lawsuit and LifeLock is forever forbidden from filing credit locks on behalf of consumers.

According to Experian and LifeLock, this is a positive for LifeLock, which it is.  They get to move out of the shadow of a nasty lawsuit and rework their business model to find something else to do to help protect consumers.  Experian and the other two credit scoring companies find this to be a huge win, since this sets precedence and makes it that much harder for any other company to provide a similar service.  The big loser in this transaction is us, the consumer, since we now have to remember to reset our credit lock with all three credit scoring companies every three months if we want to protect ourselves.  Thanks, Experian.  You’ve made it perfectly clear what you’re really trying to protect: your revenue stream.

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4 responses so far

4 Responses to “Positive for Lifelock, Experian, a loss for consumers”

  1. Markon 28 Oct 2009 at 6:29 am

    I appreciate any business that is trying to protect their revenue stream. That is how companies stay in business.

    The laws were written to allow a consumer to place a fraud alert if they have been a victim or can reasonably expect to be a victim. Placing blanket fraud alerts on all consumer files cost Lifelock practically nothing but increased costs to Experian with no revenue to balance the cost.

    Mr. Network Security Blog, what part of your income stream will you decide to give away if it also increases your costs of doing business?

  2. Joson 29 Oct 2009 at 12:24 pm

    Mark, I think the point is that Experian and the other agencies are busy protecting a revenue stream that they never should have had in the first place: selling consumer data. Fraud alerts never would have gotten so popular (thus creating the business opportunity LifeLock chose to pursue, and the costs that Experian complains about so loudly) if consumers’ data weren’t for sale to anyone interested in purchasing it, opening up huge holes that allow for the creation of fraudulent accounts as well as the general spamming of America with credit card offers. If, instead, I were able to lock my account simply, easily, and permanently (moreover, if this were–gasp!–the default!), Experian’s costs would drop through the floor (no more processing paperwork every three months) and they wouldn’t need to worry about LifeLock. Except, of course, that this would prevent them from selling my data off the back of a truck.

    I appreciate that businesses need to protect their revenue streams, but this seems like an area where creating revenue is directly in opposition to the welfare of the consumer. If Experian can’t find a way to generate revenue that doesn’t involve harming the consumers they’re supposed to be protecting, then perhaps this isn’t an area of business that should be privatized at all.

  3. idblackbox.comon 29 Oct 2009 at 3:18 pm

    I also understand businesses are in business to make money. But also agree with JOS. With the credit agencies who sell the very information that should be protected, they are careless with it. Companies like Lifelock that have to be created should be the biggest and most obvious sign that our own information is not handled securely. I also think that getting a FREE credit report only ONCE a year is absurd. Too many things can take place in a years time. Everyone should be entitled to a free credit report every month!

    It is also obvious that the credit agencies don’t make the process easy for an every day person to file the necessary paperwork for the fraud alerts either. Not impossible of course, but not made easy either.

    The most beneficial solution would be to allow individuals an opt out feature after the first time their identity was stolen. What would this do? It would provide an incentive to the credit agencies to protect individuals based on potentially lost revenue. It would also reduce the potential for the individual to have their identity stolen ever again.

  4. Rich94061on 06 Mar 2010 at 7:58 am

    There seems to be a very simple solution to this lawsuit.
    Lifelock should pay the credit companies a fee to process the fraud alerts OR Esperian could offer this service for a fee.

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