Willcox, Buyck & Williams, PA Blog

Wednesday, January 20, 2016

Lifelock Pays Massive Settlement Involving Consumer Fraud

 What are the implications for a business caught dabbling in fraud? 

As a business owner, you're likely engage in a substantial number of transactions with third-party vendors, manufacturers or suppliers -- all of whom you rely on to engage in upstanding and ethical conduct. However, corporate and consumer fraud continues to run rampant in the U.S., with agencies like the Federal Trade Commission (FTC) regularly announcing settlements, lawsuits and penalties imposed against unscrupulous, dishonest businesses.

Case in Point: LifeLock's Fraudulent Behavior

In today’s case, the consumer identity protection company LifeLock was recently slapped with the largest order enforcement action in FTC history: $100 million. As a bit of background, the company was penalized in 2010 for false advertising and various other consumers’ rights violations. More specifically, the company was alleged to have falsely guaranteed its identity theft protection products, and even displayed the CEO’s social security number on its delivery trucks – stating it “protects against [identity theft] ever happening to you. Guaranteed.”

Upon investigation by the FTC, however, it was revealed that LifeLock only protects against certain types of identity theft, not including the misuse of an existing account – which is the most common form. The company also did not insulate against employment or medical records theft, as well as a slew of other fraudulent scams abounding in the post-digital age.

As a result, the company was ordered to pay $12 million and cease engaging in false and deceptive trade practices. Now,5 years later, the company has paid $100 million for violating the terms of the 2010 order. Specifically, LifeLock deceptively advertised it used the same safeguards as banking institutions. In addition, it failed to promptly send alerts when identity theft was suspected. The company is also alleged to have failed to keep adequate corporate records, wrongfully charged users excessive fees, and failed to protect its own customers’ sensitive login and payment information.

The company’s original order has been extended an additional 13 years, provided it can manage to stay in business that long.

If you are dealing with a wayward business, or would like to ensure that your company strictly complies with advertising and marketing laws, you should consult with a knowledgeable business attorney.  


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