PHOENIX - Today an Arizona consumer filed a proposed class-action lawsuit against LifeLock, a heavily promoted company that claims to protect consumers against identity theft. The lawsuit alleges that the three-year-old company defrauds customers by offering services it cannot legally perform, and by touting a $1 million guarantee that the suit alleges is wildly misleading.

Filed in United States District Court for the District of Arizona, the suit seeks to recover money consumers paid to LifeLock.

LifeLock, headquartered in Tempe, Arizona, uses aggressive advertising to entice consumers to sign up for its $10-a-month service which it describes as "proactive identity theft protection, offer[ing] a proven solution that prevents your identity from being stolen before it happens."

Its advertisements prominently feature a supposed $1 million guarantee. In one commercial, Todd Davis, a founder and CEO of LifeLock, announces to a crowd of individuals, "If anything happens for any reason while you're a client of LifeLock, we will cover all losses and all expenses up to one million dollars." On its Web site, LifeLock makes similar statements, claiming that it will "do whatever it takes" to restore a member's good name.

According to the complaint, the fine print says otherwise: LifeLock will not pay any losses directly to the consumer and does not cover consequential or incidental damages to identity theft. The guarantee is limited to fixing failures or defects in the LifeLock services and paying other professionals to attempt to restore losses.

"The fine print in this $1 million guarantee is so limiting, we think it is almost worthless," said Rob Carey, partner in the law firm Hagens Berman Sobol Shapiro, who is representing consumers. "LifeLock buries the truth beneath a pile of inconsistencies and disclaimers so deep that we believe the intent is to mislead consumers so they don't make claims."

LifeLock also misleads consumers about the protections it can provide, according to the complaint. LifeLock's advertising campaign features Davis displaying his social security number, saying, "I'm here to prove just how safe your identity can be with LifeLock - that's my real social security number." Davis claims he can give out his personal information because of his complete confidence in his company's protection.

"What LifeLock doesn't tell you is that in 2006, Davis was a victim of identity theft when a criminal used his social security number to fraudulently obtain a $500 payday loan," said Carey.

According to the suit, LifeLock's "proven solution" consists of illegally placing and renewing fraud alerts under consumers' names with credit bureaus. Under the federal Fair Credit Reporting Act, however, corporations such as LifeLock are not allowed to place fraud alerts on a consumers' behalf - in fact, according to the complaint, the law was written so as to specifically bar credit-repair companies from improperly using fraud alerts.

Moreover, the lawsuit alleges, LifeLock overstates the protection consumers get from fraud alerts.

According to Carey, a fraud alert tells creditors that the consumer does not authorize new credit accounts, new credit cards or credit-limit increases, but, contrary to LifeLock's claims, a fraud alert does not require a creditor to contact the consumer before extending credit, according to the complaint.

They also do not protect against many types of identity theft - as the theft of Davis' identity proves, notes Carey.

"Identity theft is a rampant problem in the United States, and companies that overstate what their services can or will do are as much a part of the problem as the thieves," said Leonard Aragon, another attorney representing the consumers.

According to the complaint, one of LifeLock's founders, Robert Maynard, has been investigated and prosecuted by the Federal Trade Commission and the State of Arizona for fraud in connection with his previous "credit repair" enterprise.

As a result of that investigation, Maynard was banned for life by the FTC from participating in or promoting any credit repair business. When news accounts surfaced recently about Maynard's past, including allegations that he stole his father's identity, Maynard resigned from the company but continued to work as a consultant, according to the complaint.

The suit's named plaintiff, Byrl Lane, bought LifeLock in October 2007, after his car was stolen, and was falsely informed that creditors would have to contact him and that he would be protected against any theft involving his personal data. He was not informed that LifeLock is not authorized to secure fraud alerts on his behalf nor of the stringent limits of the $1 million guarantee.

If approved by the court as a class action, Lane would represent other similarly situated LifeLock customers.

The suit claims LifeLock violated Arizona's Consumer Fraud Act and the Arizona Insurance Code, and seeks to have all members' fees refunded due to the illegality of the contract and LifeLock's misrepresentations about its service.

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About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices in nine cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List seven times. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.

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