Spokeo, Inc., a data broker that compiles and sells millions of consumer profiles, will pay $800,000 in a settlement of charges by the Federal Trade Commission, say FTC staff attorneys Jamie Hine and Monique Einhorn.
The FTC claims Spokeo marketed consumer profiles to companies in the human resources, background screening and recruiting industries without abiding by the FTC’s Fair Credit Reporting Act (FCRA), according to Hine and Einhorn.
The FTC — in addition to news stories and online commentaries about Spokeo that provoked suspicion — was also contacted by a number of sources expressing concerns that Spokeo was marketing information illegally, Hine and Einhorn say. “People with firsthand user knowledge of the Spokeo site started getting in touch with us,” Einhorn says. “Consumers in our database were lodging complaints,” she says.
Einhorn and Hine claim Spokeo was acting with clear motive to market information to recruiting enterprises. A portion of Spokeo’s website was devoted to “marketing to HR folks,” Hine says, noting “there was a banner that said [something like] ‘HR Recruiters, click here’.” The FTC alleged Spokeo was selling subscriptions to its site based on these illicit offerings. The FTC claims Spokeo had been conducting the illegal operation since at least 2008.
According to the FTC, Spokeo created and posted endorsements of its services and attributed them to consumers and other businesses — a violation of the FTC Act’s section five, Hine says. “Spokeo directed its employees to draft comments that were posted online as though they were comments from independent sources … Companies need to disclose when comments are made on their behalf,” she says.
This is the first FTC case to address the sale of Internet and social media data for employment screening.
“Companies have often thought, for some reason, that the FCRA only relates to protecting credit information, and that any other type of information can be bought and sold,” Hine says. Though the FCRA was initiated 40 years ago when digital and social media were not components, companies still need to understand that protecting electronic information is “a natural extension of the FCRA’s enforcement,” Hine says.
In addition to the $800,000 civil penalty, the FTC’s settlement order bars Spokeo from future violations of the FCRA, as well as from making misrepresentations about its endorsements and failing to disclose a material connection with endorsers.