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Thursday, March 11th, 2010

LifeLock Fined for Inappropriate Identity Theft Protection Claims

A company that made bold promises about its ability to protect against identity theft has settled with the Federal Trade Commission after the validity of its claims was questioned.

LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.

According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.

CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.

According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.

The protection it actually provided, said the chairman, left enough holes that you could drive a truck through it.

LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.

The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."

There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.

There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.

The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.

Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.

We agreed to settle this matter, he said, in order to quickly put this behind us so we can get back to doing what we do best—helping to protect our members from identity theft.

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Posted in Financial Literacy | 4 Comments »

Sunday, March 7th, 2010

FTC: Identity Theft Top Complaint in 2009; Potential Data Breach

The Federal Trade Commission recently issued its annual report on consumer complaints filed in the last 12 months (summary available here, for the complete report, see below).

Identity theft was by far the largest complaint category, concerning 21 percent of all complaints filed. The top fifteen list looks like this:

  • Identity theft (21 percent)
  • Third party and creditor debt collection (nine percent)
  • Internet services (six percent)
  • Shop-at-home and catalog sales (six percent)
  • Foreign money offers and counterfeit check scams (five percent)
  • Internet auctions (four percent)
  • Credit cards (three percent)
  • Prizes, sweepstakes and lotteries (three percent)
  • Advance-fee loans and credit protection/repair (three percent)
  • Banks and Lenders (two percent)
  • Credit bureaus, information furnishers and report users (two percent)
  • Television and electronic media (two percent)
  • Health care (two percent)
  • Business opportunities, employment agencies and work-at-home plans (two percent)
  • Computer equipment and software (two percent)

    • The FTC reports that identity theft complaints also constituted the largest single group of consumer worries last year, but have dropped as an overall percentage of the whole. In addition to the release of 2009’s data, the FTC has posted an animated video detailing how and when to file a complaint (available here).

    A Potential Data Breach You Should Know About

    In another recent news release, the FTC noted that it has warned almost 100 companies that information they store on peer-to-peer websites (used for everything from playing video games to sharing text, audio and video files to conducting online phone calls) may be vulnerable to data breaches.

    Specifically, if peer-to-peer (P2P) software is improperly configured, any sensitive data may be accessible to anyone on the network. This presents a huge security risk, and could lead to identity theft or other costly and frustrating scams.

    What this could mean for you is that, if you have given your personal information to one of the companies in question, your information could be at risk.

    While no companies have necessarily broken the FTC’s regulations regarding storage of sensitive information, some may be at risk for significant future data breaches.

    Additional Resources

    FTC 2009 Full Report on Consumer Complaints.

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Posted in Identity Theft | 8 Comments »

Friday, January 29th, 2010

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

  • Contacting a debtor before 8:00 am or after 9:00 pm local time
  • Contacting a debtor after receiving a written request not to do so
  • Contacting a debtor at her place of work after being told not to
  • Calling the debtor with the intent to annoy, harass or abuse
  • Contacting the debtor directly when he is known to have an attorney
  • Misrepresenting a debt or using deceit to collect money
  • Threatening arrest or legal action when neither is an option
  • Seeking more than a person legally owes
  • Publishing a person’s name on a “bad debt” list
  • Reporting information incorrectly to a credit reporting bureau
  • Contacting a third party about a consumer’s debt
  • Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated.

Additional Resources

Fair Debt Collection Practices Act (PDF)

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Posted in Financial Literacy | 11 Comments »

Thursday, October 22nd, 2009

MoneyGram to Pay $18 Million to Settle FTC Charges

The Federal Trade Commission announced this week that MoneyGram International Inc., a leading U.S. money transfer service, will pay $18 million in consumer compensation for what seems to be its compliance with fraudulent money-wiring schemes. This can be seen as a minor victory for consumers.

According to the FTC, MoneyGram was complicit in schemes that cheated people out of money by doing the following:

  • Alerting them of false winnings or opportunities: Consumers were told (often via mail) that they’d won the lottery, been chosen for a “Secret Shopper” program or been guaranteed a loan.
  • Prompting them to transfer money: In order to “collect” their money or activate their accounts, customers were required to deposit a check (which had come in the mail with the notification) and wire some of the money to a third party.
  • Taking the money: In these schemes, the checks that consumers were given to deposit were fraudulent and worthless. The money transferred, then, came from consumers’ own accounts.

More than $84 Million Lost

Consumer complaints indicate that as much as $84 million was lost to such schemes, though the FTC’s site indicates that the actual total is likely higher, since many cheated consumers never file complaints.

The FTC’s charges reportedly include that MoneyGram was aware of the fraudulent activity but did almost nothing to stop it, and that 95 to 96 percent of complaints filed about the company were against 131 of the company’s 1,200-plus agents in from 2006–2008.

In addition to the $18 million in consumer redress funds, MoneyGram has agreed to include anti-fraud and agent-monitoring policies in its future operations. Because part of the charges levied by the FTC include MoneyGram’s active ignoring of reports of agent fraud, new agents will be required to complete background checks before being hired.

What to Watch Out For

In general, the FTC warns that wire transfers can be dangerous, and sets these guidelines:

  • Never wire money to a person you don’t know, in the U.S. or another country;
  • Never wire money to someone requesting to keep the transaction a secret;
  • Don’t wire money to those who claim that money transfers are the only acceptable mode of payment; and
  • Don’t wire money to someone who asks you to deposit a check and wire a fraction of that amount.

Additional Resources

Money Transfers Can Be Risky Business (PDF)

U.S. Postal Inspection Guide to Avoiding Mail Fraud (PDF)

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Posted in Financial Literacy | 5 Comments »

Tuesday, September 8th, 2009

FTC Publishes Warning About Layaway Plans

The Fair Trade Commission, a consumer protection group, has recently suggested that American consumers take some precautionary measures before agreeing to buy anything with a layaway plan.

What Is Layaway Plan?

  • Traditional layaway: These programs work by allowing you, the consumer, to buy goods bit by bit. Rather than using cash or a credit card, you can make regular payments to a retailer and receive your item only when you’ve paid its full price. The name refers to the physical act of setting aside or laying an item away until the customer has fully paid for it.
  • Contemporary layaway: Today, layaway programs still exist, but are no longer confined to stores’ physical locations. Online layaway programs allow you to make payments to a layaway company, which acts as a middleman between you and a retailer, and then have your item delivered when you’ve completed payments.

Protecting Yourself When Using Online Layaway Sites

Online layaway services each work a little differently, but they have the same basic structure:

  1. Online retailers post their items. You select which item you want to buy.
  2. Online layaway firms allow you to set up a payment plan to cover the cost of the merchandise.
  3. You make payments (by check, money order, debit or credit card) according to the agreement.
  4. When you’ve paid for your item completely, the layaway company sends money along to the merchant and the merchant sends you your purchase.

Nowadays, you can pay for anything from furniture to vacations to planned surgery with a layaway program.

Before agreeing to a layaway plan, though, make sure you understand these crucial items:

  • Terms of the layaway plan: Reading the information provided will help you determine whether there’s a limited time to make payments, a minimum payment required, service fees of any kind, and penalties or fees for late or missed payments.
  • Cancellation options: Will you get a refund if you decide you no longer want the item? Some companies offer partial refunds; some do not. You may be charged a non-refundable fee even if you back out of the agreement. Be sure you know your options for getting your money back if you change your mind.
  • Reputation of the business: Online companies can be more difficult to evaluate for seediness than real-life ones. To determine the credibility and reputation of the firm you’re working with, check with your local Better Business Bureau (www.bbb.org), your state’s attorney general (www.naag.org) and your local consumer protection agency (www.consumeraction.gov).

Pssst...

If you've been the victim of a bad layaway plan and you're slipping behind on all of your bills, filing bankruptcy may be an option for you.

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Posted in Financial Literacy | 2 Comments »

Sunday, August 2nd, 2009

FTC Announces Plan to Help Distressed Homeowners

Unfortunately, some people have seen the abysmal housing situation in the U.S. as an opportunity to take money from struggling individuals and families.

We’ve written often about the many guises of foreclosure rescue scams and how to protect your home from foreclosure.

In July, the Federal Trade Commission announced Operation Loan Lies, a “coordinated national law enforcement effort to crack down on mortgage modification scams.”

178 Companies Targeted for Scams

Operation Loan Lies includes four separate lawsuits, meaning that the FTC will have started action in 14 separate cases since April.

Typically, a foreclosure rescue scam works like this to separate unsuspecting homeowners from their money:

  • Promise to help: Scammers typically claim to be able to halt, prevent or delay foreclosure or modify the terms of your home loan. Their message attracts those who are having difficulty making payments and are growing desperate to save their homes.
  • Demand for money – or more: Once a scammer has promised to assist his victim, he asks for payment up front or assures the homeowner that he can only help if the deed to the house is in his name.
  • Fail to follow through: Scammers then do little or nothing to help the distressed homeowner. Some leave town with the money; others evict the family once they have the rights to their property.

While such a scheme may seem blatantly suspicious in writing, to those in danger of losing their homes, the promises of these scammers often sound like the only good news they’ve heard in a long time.

Learning from Others’ Mistakes

The FTC’s game plan goes beyond legal action: it has created and posted this foreclosure warning video, which features people who were victimized by foreclosure rescue scams and provides information about how to deal with the threat of foreclosure.

FTC is Following Through

In early April of this year, a number of consumer advocates (including Attorney General Eric Holder, FTC Chairman Jon Leibowitz, Treasury Secretary Timothy Geithner and others) announced that they planned to increase enforcement against people preying on distressed homeowners.

This move seems to be evidence that they’re following through.

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Posted in Mortgage Foreclosure | No Comments »