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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.
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