LifeLock Inc., which places fraud alerts on consumers' credit reports for a fee, says its pact with the credit bureau TransUnion LLC shows that its controversial business model is gaining acceptance.
The Tempe, Ariz., company has had a contentious relationship with another bureau, Experian Information Solutions Inc., which sued LifeLock in February for what it called an abuse of fraud alert systems.
Todd Davis, LifeLock's chief executive, said Wednesday that the TransUnion deal, which created an electronic connection for communication with the bureau, is "the foundation of an industry change within the credit bureaus" in their dealings with companies like his.
"It really has, for the first time, aligned a credit bureau with a company like LifeLock," he said. "TransUnion has seen that the industry is changing."
Consumers pay LifeLock to give them annual credit reports and to place and renew 90-day fraud alerts on their reports at the three major bureaus. Both services are available directly from the bureaus for free. Until last week LifeLock typically placed alerts through the same toll-free number the bureaus offer consumers for this purpose (the Arizona company is granted a limited power of attorney by the consumer).
In its suit, Experian called this tactic "posing as the consumer." It also complained about the costs to the bureau of continuously renewing fraud alerts, which Experian argued were meant to be used only when a consumer believed an identity theft was imminent.
The TransUnion arrangement addresses some of the costs to bureaus of handling alert requests, Mr. Davis said.
In the new system, which took effect Dec. 12, all requests for fraud alerts are placed electronically. TransUnion sends the confirmation directly to LifeLock instead of mailing it to the consumer. LifeLock has also agreed to pay TransUnion for a copy of the consumer's credit report, rather than request the annual free report each consumer is entitled to. (It still requests the free report from Experian and Equifax Inc.)
It costs TransUnion less to receive the fraud alert requests electronically than through a toll-free number, Mr. Davis said.
Steven Katz, a spokesman for Chicago-based TransUnion, would not say how big a factor cost was in its decision to work with LifeLock; instead, he stressed that the deal gives consumers more choices.
Though "consumers can still place fraud alerts and other services directly for free," he said, "for consumers who want the convenience of a paid service, we've now streamlined that process."
The arrangement is also meant to reassure consumers who use LifeLock's service "that their requests will be handled efficiently and securely," Mr. Katz said.
An Experian spokeswoman said the Costa Mesa, Calif., company would not discuss other bureaus' business decisions. Its suit against LifeLock is pending.
LifeLock has suffered bad publicity over other incidents. To show how safe the company's service makes him feel, Mr. Davis has prominently displayed his Social Security number in LifeLock's advertisements and on its Web site. Last year, a Fort Worth man used the number to get a loan from a lender that did not check with one of the three major bureaus. Also last year, LifeLock's founder and chief marketing officer, Robert J. Maynard Jr., resigned amid allegations of fraud.
Mr. Davis said these incidents forced the financial services industry to "put us under a microscope" before entering partnerships, thus making the TransUnion pact all the more meaningful to him. "Obviously the bureau did extensive due diligence," he said.