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The LifeLock Lawsuit

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LifeLock CEO Todd Davis doesn't write his Social Security number on the side of trucks anymore. Nor does he claim that his service "protects against (identity theft) ever happening to you. Guaranteed."

The latter move came after the Federal Trade Commission and 35 State Attorneys General sued LifeLock for making false claims to promote its services. The lawsuit, which was settled in March 2010, cost LifeLock $12 million. And as for taking his SSN out of public view? Well, since Davis's identity has been stolen over a dozen times, that was just a stroke of common sense.

The FTC's complaint against LifeLock was two-pronged: First, they charged LifeLock with misrepresenting their service as an absolute guarantee against identity theft; Second, they charged the company with misrepresenting safeguards used to to protect customer data.

Since 2006, Todd Davis has pitched his company as a lead-pipe lock against identity theft with claims like this:

By now you've heard about individuals whose identities have been stolen by identity thieves . . . LifeLock protects against this ever happening to you. Guaranteed.

But according to FTC Chairman Jon Leibowitz:

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.

LifeLock's service is most effective against new account fraud, which accounts for about 17% of account fraud. According to the FTC, however, LifeLock's service doesn't secure customers well against the abuse of existing accounts. The FTC also alleged that LifeLock offers little protection against medical and employment related identity theft.

Besides the claims of false advertising, the FTC also charged LifeLock with misrepresenting their data security policies. LifeLock promised customers that access to their data would only be available to customers on a "need to know" basis and that all data would be encrypted. The FTC charged that both of these promises were false.

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