Updated Thursday, April 3 at 7 p.m. EST
An Arizona man filed a proposed class-action lawsuit against LifeLock, a Tempe-based company that claims to protect customers against identity theft.
The lawsuit alleges that the company has defrauded customers by offering services it can't legally perform, as well as by claiming a $1 million guarantee that, after reading the fine print, is limiting to the point of being useless.
LifeLock has gained national notoriety with commercials that show CEO Tom Davis's Social Security number on the side of a truck, while Davis tells the audience that he is confident his company's services will protect him – and potential customers – from having their identity stolen.
The advertising is misleading and false, according Rob Carey, partner in the Seattle-based law firm Hagens Berman Sobol Shapiro.
“It doesn't cover the breadth of the things they imply they cover,” Carey told SCMagazineUS.com on Friday. “There are numerous ways that an identity can be compromised or stolen, and this company does nothing or little to protect against those.”
The lawsuit alleges that LifeLock illegally places fraud alerts on behalf of consumers with credit bureaus. However, under the federal Fair Credit Reporting Act, LifeLock and similar companies aren't allowed to place these alerts.
This is not the only lawsuit recently filed against LifeLock. Last month, a credit bureau, Experian, sued the company on deception and other charges. In addition, it was also revealed that Davis was a victim of identity theft.
Carey said LifeLock provides consumers with a false sense of security.
“The consumers rely on the expertise of these people without investigating it,” said Carey. “What they end up with is a bill every month for a service that isn't really provided.”
Consumers can take care of protecting their financial well-being themselves, but they often rely on companies like LifeLock because it can be a hassle to contact the credit bureaus to renew fraud alerts in their personal file.
“Also, consumers don't get any financial insurance for their time if they do have an incident unless they sign up for one of these services,” Avivah Litan, vice president and distinguished analyst at Gartner, told SCMagazineUS.com on Friday.
“It's a voluntary service,” she added. “Consumers don't have to pay for it if they don't want to. It all depends on if they think the service and time savings offer them value which is greater than the service cost.”
LifeLock's CEO said in a statement: "We are puzzled by this lawsuit because the origin and intent clearly have nothing to do with protecting consumers. There is only evidence of the great benefit LifeLock provides to its members."
"The key distinction between LifeLock and insurance providers is that LifeLock is providing a service by taking proven, proactive steps to protect its members from identity theft," he added. "In the event the service is unable to prevent the theft, our service guarantee covers the costs of fixing the problem."