LifeLock, the company that aggressively advertises its identify theft protection service, came under fire from the federal government Tuesday for failing to protect the data of its customers -- once again.
Shares of the company cratered nearly 50 percent after the government announced its finding, closing at about $8 a share.
The Federal Trade Commission said LifeLock has been falsely promising that it would protect personal data such as Social Security numbers, credit card numbers and bank accounts. It also did not alert its customers “as soon as” the company became aware of a problem.
Those failures violated a March 2010 settlement with the FTC and 35 states in which LifeLock agreed to repay customers $12 million and establish a program to protect its users’ most sensitive data.
“It is essential that companies live up to their obligations under orders obtained by the FTC,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement. “If a company continues with practices that violate orders and harm consumers, we will act.”
For ordinary consumers, the FTC's charges mark a jagged turn in the already complex data protection industry. When firms that pledge to secure personal financial data are called "deceptive," consumers trying to monitor their digital footprint and the data they trust to online companies are left bewildered, consumer advocates say. (About 7 percent of U.S. adults were victims of identity theft in 2012, the last year such data is available, according to the Department of Justice.)
“The credit reporting system is already confusing,” said Persis Yu, a staff attorney at the National Consumer Law Center. “Adding to that is a layer of companies making big promises and not having a real way to follow through.”
LifeLock said in a statement that it will fight the charges and defended its software.
"We are committed to maintaining high standards and to continual improvement, and we have spent thousands of hours and millions of dollars to achieve those standards in full compliance with the order," the company's statement said.
The company also said that it stands by its advertising, which has included television commercials boasting that it can protect someone’s Social Security number even if it is pasted on a truck that drove through Manhattan. It has even broadcast its chief executive’s Social Security number as part of its pitch.
“Banks and credit cards alone don’t offer protection like that,” boasts an ad.
“You can’t control identity theft, but you can get the best identity protection available,” offers another, with soaring guitar music in the background.
The Tempe, Ariz.-based company has been struggling to reach profitability recently, reporting a $9 million loss during its first quarter. But LifeLock continues to add members, reaching 3.89 million people during the first three months of the year.
The FTC's lawsuit was filed under seal in the U.S. District Court of Arizona and the agency did not lay out what penalties it is seeking from the company.
"I think [LifeLock] is incredibly deceptive on its face, but its aggressively marketed on television," said said Ed Mierzwinski, consumer program director at consumer watchdog group U.S. Public Research Interest Group. "I’m pleased to see the FTC actually going after a recidivist. It’s important to hold companies accountable when they violate consent decrees."