LifeLock Settles With F.T.C. Over Charges of Deception

As posted on March 9, 2010 on www.nytimes.com

By Edward Wyatt

WASHINGTON — LifeLock, the company that broadcast its chief executive’s Social Security number as part of its claim that it could protect anyone against identity theft, agreed on Tuesday to pay $12 million to settle charges that it misled consumers about the effectiveness of its service.

The settlement, announced by the Federal Trade Commission and a group of 35 state attorneys general, requires LifeLock to refrain from making further deceptive claims and take more stringent measures to safeguard the personal information that it collects from customers.

Jon Leibowitz, the chairman of the trade commission, said that “several hundred persons, at least,” who were LifeLock customers had become victims of identity fraud while using the company’s service. Customers typically paid $10 a month for the service, he said.

The commission also claimed that the “fraud alerts” LifeLock placed on individuals’ credit files protected against only certain types of identity theft, mainly the opening of new accounts, which is the cause of fewer than one in five cases of identity theft.

LifeLock’s customers were left vulnerable to misuse of their current accounts, the most common form of the crime. The identities of about eight million Americans are used illegally each year, the officials said.

“This was a fairly egregious case of deceptive advertising from our perspective,” Mr. Leibowitz said.

In an interview, Todd Davis, the LifeLock chief executive, said that the company had adopted a new advertising campaign that complied with the trade commission’s request. “We have differing views on what the intent of the message was” of the earlier ads, Mr. Davis said, adding he believed that the commission’s actions “set a standard for the entire industry to follow.”

Lisa Madigan, the Illinois attorney general, who joined Mr. Leibowitz in announcing the action at a news conference in Chicago, said that while LifeLock did provide some legitimate services, “most of what they did, you can do on your own and you can do it free.”

The biggest problem with the company’s claims, she said, was its guarantee to prevent identity theft from ever happening. “There is nothing you can do or you can purchase that is a 100 percent guarantee against identity theft,” Ms. Madigan said.

Mr. Davis knows the truth of that. After he began broadcasting his Social Security number, dozens of attempts were made to secure credit or identification using the information. At least one attempt succeeded, when a man in Texas secured a $500 payday loan in 2007 using Mr. Davis’s Social Security number.