Bankruptcy

LifeLock Fined for Inappropriate Identity Theft Protection Claims

By Chris Kramer

A company that made bold promises about its ability to protect against identity theft has settled with the Federal Trade Commission after the validity of its claims was questioned.

LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.

According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.

CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.

According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.

The protection it actually provided, said the chairman, left enough holes that you could drive a truck through it.

LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.

The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."

There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.

There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.

The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.

Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.

We agreed to settle this matter, he said, in order to quickly put this behind us so we can get back to doing what we do best?helping to protect our members from identity theft.

Full post as published by The Bankruptcy Blog on March 11, 2010 (boomark / email).