* CEO known for putting Social Security number in ads

* FTC says ads were deceptive, overstated protections

* CEO says new ads better clarify LifeLock services

(Adds CEO interview, case number, byline)

By Jonathan Stempel

NEW YORK, March 9 (Reuters) - LifeLock Inc, which promises to protect consumers from identity theft, agreed to pay $12 million to settle claims by the Federal Trade Commission and 35 U.S. states that it overstated the value of its service.

The FTC said on Tuesday the settlement bars LifeLock and its principals from making “deceptive claims” and requires the Tempe, Arizona-based company to take “more stringent measures” to safeguard the personal information of customers.

The FTC said LifeLock has advertised since 2006 that it could stop identity theft for consumers who buy its $10 per month service. But it said the company’s fraud alerts did not protect customers from misuse of existing accounts, the most common form of the crime.

Todd Davis, LifeLock’s chief executive, has been known for putting his Social Security number in ads to show confidence in his service. Such numbers are normally coveted by thieves who use them to illegally obtain loans or make purchases.

“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,” FTC Chairman Jon Leibowitz said in a statement.

Under the settlement, LifeLock cannot misrepresent that its service provides “complete protection against all forms of identity theft by making customers’ personal information useless to identity thieves.”

In an interview, Davis said “we don’t agree with the FTC’s interpretation” of the ads, saying LifeLock and the FTC “had differing views about how the company in the past should have sounded the alarm about the rapid increase in identity theft.”

He said LifeLock began a new ad campaign nearly a year ago that “clarifies better what our service provides and what consumers should expect” and that many parts of the FTC action “no longer reflect our current practices.”

Davis said he was happy to resolve the matter.

According to Javelin Strategy & Research, 11.1 million Americans were victims of identity fraud in 2009, up 12 percent from a year earlier. The total fraud amount rose more than 12 percent to $54 billion, it said.

The FTC said $11 million of the settlement will be used for customer refunds. The rest will go to the office of Illinois Attorney General Lisa Madigan for distribution to the states.

Alaska, Arizona, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, Mississippi, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington and West Virginia participated in the settlement, the FTC said.

Davis said he no longer puts his Social Security number in LifeLock ads. He said the number was breached once, when it was used in 2007 to obtain a $500 payday loan. LifeLock has more than 1.5 million customers, he said.

The case is FTC v. LifeLock Inc, U.S. District Court, District of Arizona, No. 10-00530. (Reporting by Jonathan Stempel; editing by Andre Grenon)