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Is LifeLock a Good Way to Protect Your Identity?

"LifeLock, one of the companies that offers identity-theft protection in the United States, has been taking quite a beating recently. They're being sued by credit bureaus, competitors and lawyers in several states that are launching class action lawsuits. And the stories in the media ... it's like a piranha feeding frenzy." writes Bruce Schneier in Wired magazine.

Bruce is a noted commentator on security issues.

Bruce writes that Lifelock has been given a rough ride:

"The biggest smear is that LifeLock didn't even protect Todd Davis, and that his identity was allegedly stolen.

It wasn't. Someone in Texas used Davis's SSN to get a $500 advance against his paycheck. It worked because the loan operation didn't check with any of the credit bureaus before approving the loan -- perfectly reasonable for an amount this small.

The payday-loan operation called Davis to collect, and LifeLock cleared up the problem. His credit report remains spotless."

Hmm, so the problem was with the loan operation? How widespread is this?

Bruce claims:

Basically, there are two ways to deal with identity theft: Make personal information harder to steal, and make stolen personal information harder to use.

We all know the former doesn't work, so that leaves the latter.

If Congress wanted to solve the problem for real, one of the things it would do is make fraud alerts permanent for everybody. But the credit industry's lobbyists would never allow that.

Current fraud alerts expire after 90 days, and companies like LifeLock exist because they can continue the fraud alert. After saying some nice things about the company, Bruce surprising concludes:

"LifeLock's business model is based more on the fear of identity theft than the actual risk."

Bruce's conclusion is that the $120/year isn't worth it because you can effectively achieve the same thing by renewing the fraud alerts.

But would you regret a) forgetting to renew the alert and getting burned more than b) paying $120/year to forget about it?

After all, the entire home alarm industry is based upon selling insurance against regret, why should the identity theft protection industry be any different? Buying insurance assures peace of mind, not winning the gamble.

Related articles

• ID fraud-prevention firm LifeLock hit with customer lawsuits [via Zemanta]
• Think Twice Before Paying for Credit Protection [Credit] [via Zemanta]
• LifeLock CEO on the Today Show [via Zemanta]
• Lifelock Sued In Three States [via Zemanta]

Full post as published by Misleading Advertising Law on June 12, 2008 (boomark / email).