LifeLock: the plot thickens


(Follow-up from earlier post)

The past few weeks had more developments on the story of LifeLock, the company that promises identity theft protection and challenges would-be criminals with the social security number of the CEO. New York Times published an article on May 24th covering this story. The overall tone of the article is fairly negative on the value proposition of this service:

“…a fraud alert is more like a burglar alarm. And if the alert repeatedly fires off false alarms, forcing creditors to constantly double-check the identities of LifeLock customers who have never been victims of fraud, it is possible that those credit issuers will pay less attention to them. Experian is so worried about this, along with other issues, that it has filed suit against LifeLock.”

Strangely the company has found a new ally in Bruce Schneier who came out swinging in defense of LifeLock.  BS portrays the issue purely as a conflict of business models between the triumvirate of credit reporting bureaus (Equifax, Experian and TransUnion) and Lifelock. Credit reporting agencies prefer that the process of completing a credit check and clearing an applicant is easy. Lifelock’s mission in life is to make that process as difficult as possible for the lender, in order to reduce the risk that the application was fraudulent.

“The reason lenders don’t routinely verify your identity before issuing you credit is that it takes time, costs money and is one more hurdle between you and another credit card. (Buy, buy, buy — it’s the American way.) So in the eyes of credit bureaus, LifeLock’s customers are inferior goods; selling their data isn’t as valuable. LifeLock also opts its customers out of pre-approved credit card offers, further making them less valuable in the eyes of credit bureaus.”

And later in the same approving vein: (links in the original)

“It’s pretty ironic of the credit bureaus to attack LifeLock on its marketing practices, since they know all about profiting from the fear of identity theft. Facta also forced the credit bureaus to give Americans a free credit report once a year upon request. Through deceptive marketing techniques, they’ve turned this requirement into a multimillion-dollar business.”

One point where everyone is in agreement is that the services are not worth it from a purely financial point of view. Most of the actions taken on behalf of subscribers by the commercial services can also be taken by individuals directly for free. Convenience is the main selling point. For example anyone can request to have an alert put on their credit file but these expire after 90 days.

The original Wired article covering allegations that the service does not work appears to have been removed. Not to worry: Kim Zetter (full disclosure– she is a friend) writing on the ThreatLevel blog has missile lock on the company. In a series of posts, she highlighted an original piece from the Phoenix New Times that surfaced questionable past connections of the co-founder. LifeLock announced in response that he was resigning from the company.

cemp


One Comment on “LifeLock: the plot thickens”

  1. ryanmhurst says:

    Interesting, see: http://www.unmitigatedrisk.com/archive/2008/06/18/195.aspx for my response.

    I am a subsriber to Debix, a LifeLock competitor, its a long story but I for one see value in such services HOWEVER I personally would avoid LifeLock for a number of reasons.

    As allways Cem, a well writen and well thought out post.


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