LifeLock will pay $11 million to settle FTC complaint
The company is barred from making deceptive claims and is required to safeguard customers' private information.
LifeLock Inc. has agreed to pay $11 million to the Federal Trade Commission and $1 million to a group of 35 state attorneys general to settle complaints that the company used false claims to promote its identity theft protection services -- which it widely advertised by displaying the CEO’s Social Security number on the side of a truck.
In one of the largest FTC-state coordinated settlements on record, LifeLock and its principals will be barred from making deceptive claims and required to take more stringent measures to safeguard the personal information it collects from customers.
“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” FTC Chairman Jon Leibowitz said.
“This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Illinois Attorney General Lisa Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”
Since 2006, LifeLock’s ads have claimed that it could prevent identity theft for consumers willing to sign up for its $10-a-month service.
According to the FTC’s complaint, LifeLock has claimed:
- “By now you’ve heard about individuals whose identities have been stolen by identity thieves. ... LifeLock protects against this ever happening to you. Guaranteed.”
- “Please know that we are the first company to prevent identity theft from occurring.”
- “Do you ever worry about identity theft? If so, it’s time you got to know LifeLock. We work to stop identity theft before it happens.”
The FTC’s complaint said the fraud alerts that LifeLock placed on customers’ credit files protected only against certain forms of identity theft and gave them no protection against the misuse of existing accounts, the most common type of identity theft. The agency said the company also provided no protection against medical or employment identity theft, in which thieves use personal information to get medical care or apply for jobs.
Even for types of identity theft for which fraud alerts are most effective, LifeLock does not provide absolute protection, the FTC said. LifeLock alerts creditors opening new accounts to take reasonable measures to verify that the individual applying for credit actually is who he or she claims to be, but in some instances, identity thieves can thwart even reasonable precautions.
New-account fraud comprised only 17% of identity theft incidents, according to an FTC survey released in 2007.
The FTC’s complaint also said that LifeLock falsely claimed that it would prevent unauthorized changes to customers’ address information, that it constantly monitored activity on customer credit reports, and that it would ensure that a customer always would receive a telephone call from a potential creditor before a new account was opened.
In addition to deceptive ID protection claims, LifeLock also made claims about its own data security that were not true, the FTC alleged. The agency said LifeLock routinely collected sensitive information from its customers, including their Social Security and credit card numbers. The company claimed:
- “Only authorized employees of LifeLock will have access to the data that you provide to us, and that access is granted only on a ‘need to know’ basis.”
- “All stored personal data is electronically encrypted.”
- “LifeLock uses highly secure physical, electronic, and managerial procedures to safeguard the confidentiality and security of the data you provide to us.”
The FTC said LifeLock’s data was not encrypted, and sensitive consumer information was not shared only on a “need to know” basis. In fact, the agency said, the company’s data system was vulnerable and could have been exploited by those seeking access to customer information.
Related reading at ConsumerAffairs.com:
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.
Having worked as a writer, reporter and editor for more than 25 years, Editor Julie Tilsner is the sort of person who can't help but correct grammar in Facebook postings and on billboards. She's written for BusinessWeek, the Los Angeles Times, Parenting, Redbook, AOL and others. She lives in Los Angeles County with her family and loves to drink wine and practice yoga, although not generally at the same time.
A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.
Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
Marilyn Lewis is an award-winning writer with a passion for getting readers clear, straight information that helps them stay out of financial trouble. A former reporter for The San Jose Mercury News, she works from her home in Port Townsend, Wash. Contact her at MarilynLewis@Outlook.com.
LATEST BLOG POSTS
Those shackled with student loan debt are increasingly being targeted by scams and shady companies promising relief.