“With a fraud alert on a consumer’s credit profile, banks and other businesses are required to make a reasonable effort to check with a consumer before opening a new line of credit in his or her name.
The consumer normally has to contact a credit reporting bureau directly to place the alert, and then repeat the process every 90 days for as long as the risk remains — a minor hassle that LifeLock and other companies have been happy to help consumers avoid, for a fee. On its face, the business model appeared consistent with FACTA, which allows fraud alerts to be placed by third parties acting on behalf of the consumer.
But in its lawsuit, Experian complained that LifeLock (.pdf) “surreptitiously placed hundreds of thousands” of alerts on Experian files “by posing as the consumer,” even when there was no suspicion of identity theft. LifeLock then renewed the alerts every 90 days.
Claiming it was losing “millions of dollars every year” processing such requests, Experian asked a judge to rule that LifeLock was engaging in unlawful and unfair business practices under California’s Unfair Competition Law.
U. S. District Judge Andrew Guilford granted the motion (.pdf) last week, finding that federal lawmakers, in writing FACTA, did not intend for consumers to be able to contract with a business to place fraud alerts.”