FTC Fines Data Broker Spokeo 800000 Dollars to Settle Charges of Violating Fair Credit Reporting Act

In the first Federal Trade Commission (FTC) case to address the sale of Internet and social media data in the employment screening context, Spokeo, Inc. – a data broker that compiles and sells detailed information profiles on millions of consumers – has agreed to pay a $800,000 fine to settle FTC charges that the company marketed 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), according to a press release at http://www.ftc.gov/opa/2012/06/spokeo.shtm.

The FTC charged that Spokeo operated as a Consumer Reporting Agency (CRA) that 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.

In addition to imposing the $800,000 civil penalty, the FTC’s settlement order with Spokeo – which is available at http://www.ftc.gov/os/caselist/1023163/120612spokeoorder.pdf – bars the company from future violations of the FCRA. The settlement also bars Spokeo from making misrepresentations about its endorsements or failing to disclose a material connection with endorsers since the FTC also charged that the company violated the FTC Act by deceptively posting misleading “endorsements” of their service portrayed as independent when they were created by Spokeo employees.

According to the FTC: Spokeo collects personal information about consumers from hundreds of online and offline data 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 alleged that: Spokeo marketed the profiles on a subscription basis to human resources professionals, job recruiters, and others as an employment screening tool. The company encouraged recruiters to “Explore Beyond the Resume.” It ran online advertisements with taglines to attract employers, and created a special portion of the Spokeo website for recruiters. It created and posted endorsements of its services, representing those endorsements as those of consumers or other businesses.

Passed by Congress, the FCRA promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies (CRAs) and regulates the use and dissemination of consumer reports. To ensure compliance with the FCRA, the FTC pursues an aggressive enforcement program aimed at the credit reporting system including CRAs, those who send CRAs information, and consumer report users. 

More information about The United States of America (For the Federal Trade Commission), Plaintiff, v. Spokeo, Inc., Defendant (United States District Court for the Central District of California) Case No. CV12-05001 FTC File No. 1023163 is available at: http://www.ftc.gov/os/caselist/1023163/index.shtm.

For more information about FCRA compliant background checks, visit Employment Screening Resources (ESR) – ‘The Background Check Authority’ and a nationwide background screening firm accredited by The National Association of Professional Background Screeners (NAPBS®) – at http://www.esrcheck.com/, call 415.898.0044, or email customerservice@esrcheck.com.

Sources:
http://www.ftc.gov/opa/2012/06/spokeo.shtm
http://www.ftc.gov/os/caselist/1023163/120612spokeoorder.pdf
http://www.ftc.gov/os/caselist/1023163/index.shtm
www.ftc.gov/os/statutes/031224fcra.pdf

About Employment Screening Resources (ESR):

Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’– provides accurate and actionable information, empowering employers to make informed safe hiring decisions for the benefit for our clients, their employees, and the public. ESR literally wrote the book on background screening with “The Safe Hiring Manual” by Founder and CEO Lester Rosen. ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by a small percentage of screening firms. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about Employment Screening Resources (ESR), visit http://www.esrcheck.com/, call 415.898.0044 or 888.999.4474 (Toll Free), or email customerservice@esrcheck.com.

About ESR News:

The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at tahearn@esrcheck.com.