LifeLock, which has extensively advertised its identity theft protection services on television, agreed to pay $11 million Feb. 10 as part of a settlement with the Federal Trade Commission over claims that LifeLock used false claims to promote its services. LifeLock also agreed to pay another $1 million to a group of 35 state attorneys general to settle similar claims.
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 they collect 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 in a statement.
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. The FTC's complaint charged that 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. It also allegedly provided no protection against medical identity theft or employment identity theft, in which thieves use personal information to get medical care or apply for jobs.
The FTC's complaint further alleged that LifeLock also 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. The FTC charged that those claims were false.
The FTC charged that LifeLock's data was not encrypted, and sensitive consumer information was not shared only on a "need-to-know" basis. In fact, the agency charged, the company's data system was vulnerable and could have been exploited by those seeking access to customer information.
"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."