Lifelock fraud alert firm settles for $12M in ad suit

March 9, 2010 3:13:54 PM PST
A company that ran commercials guaranteeing protection from identity theft has reached a settlement in Illinois and 34 other states after their ads were found to be misleading.

Lifelock promised consumers complete protection against all forms of identity theft. However, the Federal Trade Commission and attorneys general from 35 states found the company did not deliver on that claim, while charging customers $10 a month. The result is a $12 million settlement which was announced in Chicago Tuesday.

Illinois Attorney General Lisa Madigan and the Federal Trade Commission say identity theft has been the No. 1 complaint by consumers for years. It has grown so much that Americans are seeking ways to guard against theft. The message Tuesday was beware of what you pay for.

Since 2006 Lifelock ran ads featuring a truck with CEO Todd Davis's Social Security number on the side. They guaranteed they could prevent identity theft for consumers willing to sign up for its $10-a-month service.

"In truth, though, the protection Lifelock provided left such a large hole in it, you could drive that truck right through it," said Jon Leibowitz, FTC chairman.

Madigan showed a letter that she actually received from Lifelock warning her that she neededtheir service.

"Often times they included scare tactics to sell the company's services. Lifelock warned consumers that they were at a heightened risk of identity theft, when Lifelock had no basis for making such a claim,' said Madigan.

After the $12 million dollar settlement was announced Lifelock issued a statement saying: "Lifelock is pleased with this agreement, which , for the very first time, works to set advertising guidelines for the entire industry. We welcome federal and state efforts to regulate our industry because doing so helps to protect consumers from the risks of identity theft."

Madigan said there is no service that can give a 100 percent guarantee against stopping ID theft, but she said consumesr should take several steps to protect themselves, including:

  • getting a free copy of your credit report each year,
  • reviewing all credit card and bank statements checking for charges or withdrawals you did not make,
  • and never giving out your Social Security number.
  • "If you suspect that you have become or are about to become a victim of identity theft, you can place a fraud alert on your credit reports for free. Lifelock doesn't have to do that for you," said Madigan.

    Lifelock is still in business, but under the agreement, the company cannot misrepresent its services.

    "There are some legitimate things that the service offers. As long as they advertise truthfully then it's not a problem," said Leibowitz.

    The FTC estimates that 1 million people across the country paid Lifelock for its services. All customers will be contacted soon to find out if they are eligible for refunds.

    If anyone in Illinois thinks they are the victim of ID theft they should call the attorney general's hotline at (866) 999-5630, which will help you repair your credit and prevent future problems.

    As for Todd Davis, the CEO of Lifelock who plastered his Social Security number on the side of the truck-- after the commercials aired, he became a victim of identity theft.