The Federal Trade Commission on Tuesday announced that identity theft protection company LifeLock has agreed to pay $12 million to the FTC and 35 state attorneys general to settle charges that its service doesn't work as advertised.
The agency says the payment represents one of the largest FTC-coordinated settlements on record. The settlement forbids company principals from making further deceptive claims and requires the company to take measures to protect customer data.
"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," said FTC Chairman Jon Leibowitz in a statement.
Since 2006, LifeLock has been charging customers $10 per month to protect them against identity theft. The company rose to prominence as a result of its advertising campaign involving the public display of CEO Todd Davis's social security number on the side of a truck, ostensibly as proof that its identity theft protection service worked.
The FTC charged that the fraud alerts LifeLock placed on customer accounts weren't effective against most types of identity theft, that its service claims were false, and that its data protection claims were false.
In 2008, LifeLock was sued in a civil lawsuit that made claims similar to the FTC's allegations. That lawsuit alleged that "the statements by LifeLock's CEO regarding the ability of LifeLock to protect his own identity are deceptive because his identity was stolen while he was a customer..."
The 2008 lawsuit also alleged that the company had engaged in the "concealment, suppression, and omission of material facts" about its service. It further claimed that the company failed to divulge that one of the company's founders, Robert J. Maynard Jr. had been subject to a Federal Trade Commission injunction in 1997 "for alleged unfair or deceptive acts or practices by the defendants in connection with the sale of credit improvement services advertised in an infomercial and the collection of fees by depositing drafts drawn on consumers' checking accounts."
In an interview with InformationWeek in 2008, LifeLock CEO Todd Davis insisted that his company's service was effective. "While it's not 100% bulletproof, [LifeLock] is an effective deterrent to identity theft," he said.
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