US states take action against "ID Theft" protection company

“LifeLock sold Californians a false sense of security against identity theft with advertisements that were chock full of inflated claims and promises,” Edmund Brown, California's Attorney General said yesterday, announcing a settlement with the company. “Today’s settlement prevents the company from misrepresenting and overstating its services and reimburses LifeLock subscribers who were misled.”

Last year, Brown joined the FTC and numerous attorneys general to jointly investigate LifeLock’s business practices. The investigation followed a number of misleading advertisements from the company that included a testimonial from the CEO in which he gave out his social security number to demonstrate his confidence in LifeLock’s services.

Brown’s complaint contends that LifeLock falsely led customers to believe that they would be protected against all forms of identity fraud, reimbursed directly for losses tied to identity fraud and telephoned prior to any new credit being issued under their name. None of these claims were accurate.

LifeLock advertisements also implied that any fraudulently obtained personal information would be removed from criminal websites, when in fact the company only notified consumers when their information had been compromised.

The settlement prevents LifeLock from misrepresenting that its services:

• Provide complete protection against all forms of identity theft;
• Constantly monitor activity on each of its customers’ consumer reports;
• Prevent unauthorised changes to customers’ address information; and
• Ensure that a customer always receives a phone call from a potential creditor before a new credit account is opened in the customer’s name.

LifeLock also agreed to pay USD11 million in restitution to its subscribers and USD1 million to cover the costs of the states’ investigation. Brown’s office and the FTC will jointly send letters over the next two weeks to customers in California that subscribed to LifeLock between 1 April, 2005 and 30 March, 2009, notifying them of the agreement and how they can opt-in to the settlement. LifeLock typically charged consumers USD10 a month to subscribe to its identity fraud protection services.

Under the terms of the agreement, LifeLock must also stop overstating the risk of identity fraud to consumers. In the past, LifeLock sent direct mailers to individual consumers that featured warnings such as, “You’re receiving this because you may be at risk of identity theft,” without knowledge or facts to substantiate these claims.

A number of the services offered by LifeLock are available free-of-charge to consumers including, placing a fraud alert on a credit record and requesting an annual credit report to review credit history and identify errors and inaccuracies. Both services can be completed by contacting one of the three major credit reporting agencies. Consumers are also best-positioned to monitor their own bank accounts and credit card statements for unauthorized withdrawals or charges.

Other states participating in today’s agreement include: Alaska, Arizona, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, Mississippi, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington and West Virginia.