(CN) - LifeLock agreed to pay $12 million Tuesday to settle claims brought by the Federal Trade Commission and 35 states that the identity security company overstated its ID theft protection services and exaggerated consumer risk.
One of the largest joint FTC-state settlements on record, the final judgment in San Diego Superior Court prohibits LifeLock from overstating its services or inflating consumers' risk of identity theft.
As part of its marketing strategy, LifeLock printed the CEO's Social Security number on the side of a truck and sent direct mail to consumers stating, "You're receiving this because you may be at risk of identity theft," without backing up the claim, according to a joint FTC-state investigation launched in 2009.
LifeLock agreed to pay $11 million to the FTC and $1 million to a group of 35 state attorneys general. The company also said it would adopt more stringent measures to protect customers' personal information.
According to the joint investigation, LifeLock falsely advertised that it could remove personal information from criminal Web sites if the information had been obtained illegally. But in reality, investigators say, LifeLock only notified consumers when their information had been compromised.
LifeLock further agreed to stop promising customers that they were protected against all forms of identity theft, that they would be reimbursed for losses if their identities were stolen, and that they would receive phone calls before any new credit accounts were opened in their names.
LifeLock also said it would no longer promise to constantly monitor customers' consumer reports or prevent unauthorized changes to their address information.
"LifeLock sold Californians a false sense of security against identity theft with advertisements that were chock full of inflated claims and promises," California Attorney General Edmund Brown said in a statement. "Today's settlement prevents the company from misrepresenting and overstating its services and reimburses LifeLock subscribers who were misled."
The settlement will affect consumers who subscribed to LifeLock's services between April 1, 2005 and March 30, 2009. Customers typically paid $10 a month for the advertised identity threat protection services.
Release: Complaint: Judgement: http://ag.ca.gov/cms_attachments/press/pdfs/n1869_lifelock-_judgment.pdf
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