Data broker settles Fair Credit Reporting Act violations for $800,000

PASADENA, Calif.—A data broker has agreed to pay $800,000 to settle charges that it marketed profiles to human resources, background screening and recruiting companies without protecting consumers' information, the Federal Trade Commission said Tuesday.

In a statement, the FTC said Pasadena, Calif.-based Spokeo Inc. operated as a consumer reporting agency and violated the Fair Credit Reporting Act from 2008 to 2010 by failing to ensure that the information it sold as an employment screening tool was accurate and would be used only for legally permissible purposes.

Spokeo also failed to tell companies using the reports about their obligation under FCRA, including the requirement that they notify consumers if the company took an adverse action based on information contained in the report, according g to the FTC.

In addition, the FTC charged Spokeo with deceptively posting independent endorsements of its service on websites and blogs when they were actually devised by the firm's own employees.

The FTC's settlement order bars Spokeo from future violations of the FCRA. It also bars the company from misrepresenting its endorsements or failing to disclose a material connection with endorsers.

The FTC said Spokeo collects personal information about consumers from hundreds of on-line and offline sources, including social networks, then merges the data to create detailed personal profiles of consumers. The profiles could include information such as hobbies, ethnicity, religion, social networking site participation and photos, in addition to name, address, age range and email address, according to the FTC.

Prior website version

When asked to comment on the fine, a spokeswoman referred to a blog by Spokeo President and founder Harrison Tang that said the FTC focused on a prior version of its website.

“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,” Mr. Tang said in the blog. “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.”

He also said the agreement with the FTC “will allow for a continued open dialogue regarding our business practices…We are committed to making clarity and transparency top priorities for our customers.”

This year, the FTC sent a letter to data marketers warning that providing criminal background information to employers through their background screening applications may violate the FCRA.