LifeLock, an identity theft security firm, has begun mailing checks to customers nationwide, part of a settlement with the Federal Trade Commission (FTC) and 34 states.
The settlement was reached in March of this year, following
an investigation into the company's allegedly misleading advertising
practices.
LifeLock sells identity theft services that past advertisements allegedly claimed were "guaranteed" to protect consumers' personal information and prevent criminals from using it to open accounts in consumers' names. Some ads even included LifeLock CEO Todd Davis' social security number in an effort to demonstrate Davis' confidence in the services offered.
The FTC and various state attorneys general 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.
Not absolute
Even for types of identity theft for which fraud alerts are most effective, LifeLock does not provide absolute protection, the investigation found. They alert creditors opening new accounts to take reasonable measures to verify that the individual applying for credit actually is who he or she claims to be, but in some instances, identity thieves can thwart even reasonable precautions.
New account fraud, the type of identity theft for which fraud alerts are most effective, comprised only 17 percent of identity theft incidents, according to an FTC survey released in 2007.
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.
Florida Attorney General Bill McCollum says more than 70,000
LifeLock checks will be mailed to consumer in his state. Consumers will each
receive a check for $10.87 and will have 60 days to cash the checks. The
distribution represents all consumers who were eligible for refunds and closes
out the period for filing refund claims.
In
addition to the refunds, LifeLock is prohibited from overstating the risk of
identity theft to consumers, including whether a particular consumer has become
or is likely to become a victim.
LifeLock is also prohibited from misrepresenting that its
services can protect against or eliminate the risk of identity theft or that it
will constantly monitor activity on each of its customers' consumer reports.
