FTC: Company to Pay $100 Million for Violating Consumer Protection Order
A company that promises to protect consumers from identity theft has been accused of violating a federal court order that requires it to keep those promises and refrain from deceptive advertising.
The case against LifeLock dates back several years, but now, the Federal Trade Commission (FTC) announces LifeLock has agreed to a $113 million settlement in the matter – the largest monetary award ever wrangled by the commission in an enforcement action.
The FTC first took action against the firm five years ago, when it alleged in the U.S. District Court for the District of Arizona that the company didn’t deliver on advertising claims promoting its identity theft services. The firm vows to keep consumers’ sensitive personal information shielded from thieves. But the FTC alleges the company failed to provide the kind of protection it promised, meaning it misled consumers with advertising that was deceptive.
The 2010 settlement agreement was one that was reached in accord not just with the FTC but also 34 state attorneys general. Then last July, the FTC filed a complaint alleging the company wasn’t upholding its obligations under the court order. Now, the company has agreed to settle these new claims. Of that $113 million, the FTC will be in receipt of $32 million, which will be set aside for consumers who file complaints through state attorneys general. The company claims it isn’t aware of any such claims filed so far. Another $68 million is going to be set aside to settle a class action lawsuit, which will need approved by a court. That money has to go directly to consumers, and can’t be spent on legal fees or administrative costs.
While agreeing to pay the settlement, the firm has not conceded wrongdoing. The company has said the fine is connected to advertisements it no longer runs and policies that are no longer in place. Nothing about the settlement requires the firm to alter current products or practices.
The company removed its LifeLock Wallet mobile application from Amazon Apps, App Store and Google Play after it was shown a number of aspects of the product weren’t fully compliant with security standards necessary for companies that handle credit cards. However, an attorney for the firm told Consumer Reports the FTC case isn’t related. Exact details of the specific violations have not been released by the FTC, as court records have been sealed at LifeLock’s request as part of the settlement agreement.
Although $100 million sounds like a significant amount, our Miami debt defense lawyers note it’s less than half of the $217 million the firm spent on advertising, sales and marketing just last year
FTC Chairwoman Edith Ramirez said the charges in this case were “particularly troubling” because this was a company that promised to protect personal data and failed. Ramirez alleged the company told consumers its safeguards were as strong as those used by banking institutions. In fact, they were not. And what’s more, despite promises to inform consumers right away if their data was breached, LifeLock didn’t notify some consumers at all.
This new agreement follows a previous $12 million fine from 2010. At that time, the former chairman of the FTC stated that LifeLock’s ads were smoke and mirrors. In truth, the information security protections were not only woefully inadequate, they “actually provided enough holes you could drive a truck through it.”
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