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FTC: Data broker Spokeo to pay $800,000 for selling personal data to employers for background checks

FTC says Spokeo profiles contain myriad personal info such as name, address, age range and email address, hobbies and participation on social networking sites

By , Network World
June 12, 2012 11:30 AM ET

Network World - The Federal Trade Commission today said data broker Spokeo will pay $800,000 to settle FTC charges it sold personal information it gathered from social media and other Internet-based sites to employers and job recruiters without taking steps to protect consumers required under the Fair Credit Reporting Act.

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.

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The FTC alleges that 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 allowable reasons; 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 deceptively posted endorsements of its service on news and technology websites and blogs, portraying the endorsements as independent when in reality they were created by Spokeo's own employees.

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. The company encouraged recruiters to "Explore Beyond the Resume." It ran online advertisements with tag lines 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.

In response to the FTC announcement, Spokeo issued a statement (the full version is here) that in part reads: "A few years ago, we were eager to share our social network search tool with anyone who could find good use for it. Focusing on a prior version of our website, the U.S. Federal Trade Commission (FTC) believes that our targeted marketing (at that time) implicated the Fair Credit Reporting Act (FCRA), which regulates the collection, dissemination and use of consumer information, including credit information provided by consumer reporting agencies.

"It has never been our intention to act as a consumer reporting agency. We have made changes to our site and our internal business practices in order to ensure we don't infringe upon the FCRA's important consumer protections, and to ensure an honest and transparent service that will continue to be easy for our customers to use. We are a technology company organizing people-related data in innovative ways. We do not create our own content, we do not possess or have access to private financial information, and we do not offer consumer reports. Our agreement with the FTC will allow for a continued open dialogue regarding our business practices. We are eager to help shape the future of online information sharing. As we continue to provide new innovations within the people search industry, we are committed to making clarity and transparency top priorities for our customers."

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