Earlier this week, the Federal Trade Commission ("FTC") announced that it entered into a settlement with Spokeo, Inc. for $800,000 over charges that it allegedly marketed consumer profiles to companies in the human resources, background screening, and recruiting industries without taking steps to protect consumers required under the Fair Credit Reporting Act ("FCRA").
Spokeo is a data broker that compiles and sells detailed information profiles on millions of consumers from its consumer facing people search engine and other sources, including social networks. It merges the data to create detailed personal profiles of consumers. The profiles contain such information as name, address, age range, and email address. They also might include hobbies, ethnicity, religion, participation on social networking sites, and photos.
The FTC claims the company marketed by encouraging recruiters to “Explore Beyond the Resume.” The FTC alleges that from 2008 until 2010, Spokeo marketed the profiles on a subscription basis to human resources professionals, job recruiters, and others as an employment screening tool.
According to the FTC, Spokeo operated as a consumer reporting agency and violated the FCRA by failing to make sure that the information it sold would be used only for legally permissible purposes; failing to ensure the information was accurate; and failing to tell users of its consumer reports about their obligation under the FCRA, including the requirement to notify consumers if the user took an adverse action against the consumer based on information contained in the consumer report.
The FTC also alleged that Spokeo, on its news and technology websites and blogs, had deceptively posted endorsements of its service, portraying the endorsements as independent, when in reality they were created by Spokeo's own employees.
In addition to imposing the $800,000 civil penalty, the FTC's settlement order bars Spokeo from future violations of the FCRA, and bars the company from making misrepresentations about its endorsements or failing to disclose a material connection with endorsers.
For more information, please contact Jonathan Pompan at 202.344.4383 or [email protected].
Jonathan Pompan is Of Counsel at Venable LLP in the Washington, DC office. He represents advertisers and marketers and consumer financial service providers before the Consumer Financial Protection Bureau, Federal Trade Commission, and state Attorneys General.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can be provided only in response to a specific fact situation.