Creating a WCF Client in Visual Studio 2010, I struggled with this error. I was running as the currently logged on user and the service was as well so this made no sense to me. I found that this entry in the client app.config was the culprit:
<userPrincipalName value="MYDOMAIN\MyUsername" />
Simply deleting these 3 lines allowed me to test the client.
Let me know if this helped you!