Submitted by Jen Jones on Mon, 03/29/2010 - 9:47am
To follow up on a recent post about the overzealous marketing of credit report monitoring services, we bring you the latest in what can now be called a disturbing trend in financial fear-marketing.
LifeLock , the company that boasted their monthly fee-based privacy system could thwart even the Impossible Missions Force from seizing your identity or accessing your credit is now on the hook for $12 million to the Federal Trade Commission (FTC) for ... wait for it ... misleading consumers about the nature of its products.
You can't make this stuff up.
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Not long ago, LifeLock had mobile billboards plastered with its CEO's social security number parading through major metropolitan areas and were blistering radio and television channels with endless pronouncements about the strength of their identity monitoring products. The ads were extremely effective.
The company managed to positively boost its product without literally telling you to run under the bed and hide from all the identity thieves lurking inside your computer and around your trash cans. The understated importance of the CEO's claim made one think, "Man, I better do something or I'll be a victim." Life insurance salesmen were taking copious notes.
The company is also settling with more than 30 states, including North Carolina. In a written statement, FTC Chairman Jon Leibowitz summarized the issue, "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."
The settlement contains language that orders the company to immediately cease making claims that its service can absolutely prevent identity theft and make customer information useless to identity thieves.
The company also has to agree to—this is toughest part of the settlement—protect its customers' information. Apparently, the FTC investigation uncovered that once under the watch of LifeLock employees, the privacy of customer information was neglected.
According to the FTC, the most misleading component of the company's marketing plan was the claim it can stop all forms of identity theft. The truth is that it can only prevent a very specific type of theft that is found in a minority of cases.
Very much like keeping track of your credit, you can monitor fraud quite easily on your own. If you have credit cards, you can arrange a number of alerts that pertain to spending habits and frequency. Your bank can do the same for your debit card as well.
This post is not meant to minimize the impact of identity theft. It is certainly a very painful and common type of crime that has lead many people to bankruptcy court. And in many cases, even the most diligent purveyors of their finances have been become victim. However, it is unfortunate that today, in the age of the Great Recession, we have to be as equally watchful of the those who come to us with help, regardless of how often they are put in front of us as heroes.
The LifeLock case has rendered the company's advertising plan somewhat mute. In response, you may have noticed a few other industry players fighting for the competitive space. LifeLock did right by their investors by placing a very positive spin on the settlement, calling it a step forward for consumers.
Todd Davis, LifeLock CEO, remained front and center in the case, saying, "We welcome federal and state efforts to regulate our industry, because doing so helps to protect consumers from the risks of identity theft."
Mr. Davis, who else should we be worried about?
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