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Search Site Settles Credit Reporting Charges
Spokeo, a six-year-old online business designed to help people find each other, is paying $800,000 to settle a case with the Federal Trade Commission.
From the FTC's statement:
Spokeo, Inc., a data broker that compiles and sells detailed information profiles on millions of consumers, will pay $800,000 to settle Federal Trade Commission charges that it marketed the 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. This is the first Commission case to address the sale of Internet and social media data in the employment screening context.
The FTC alleged 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 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.
Where did Spokeo get the information it was selling?
According to the FTC, Spokeo collects personal information about consumers from hundreds of online and offline data sources, including social networks.
Hm. Was the data public or private? The FTC doesn't make that clear, so let's consult Spokeo's statement -- more precisely, a blog post from founder and president Harrison Tang:
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.
Wait. No private financial information? What is this website doing under the Fair Credit Reporting Act? Did it find a brilliant new way to assemble credit reports without private financial information?
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.
Oh. Spokeo wasn't trying to create credit reports.
Spokeo doesn't say whether it had any idea at the time it pitched its database to employers as a screening tool that this service would make the FCRA relevant to its service. It's easy to imagine it might not have. While the existence of the FCRA is well-known, it looks from a distance like a special law governing a specific line of business -- a line Spokeo didn't intend to enter.
When there are more laws than anyone can know even the scope of, there is no way to know what laws you might be accused of breaking.