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June 12, 2012

Spokeo Settles FTC Charges

Spokeo to Pay $800,000 to Settle FTC Charges Company Allegedly Marketed Information to Employers and Recruiters in Violation of FCRA

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.

It was a pretty complicated issue as to whether Spokeo is a consumer reporting agency or just a search engine.  The difference between Spokeo and Google, for instance, is the focus of searches run on the different sites.  On Google, you can search for anything.  On Spokeo, your search is limited to the online identities of individuals, i.e. their identities on Facebook, MySpace, Ebay, dating sites, etc.  Spokeo is thus a dream site for potential employers to research potential employees.  Yet Spokeo did not comply with any of the FCRA's requirements regarding being a consumer reporting agency or regarding the publication of consumer reports to employers.  I suspect that will change with today's settlement.

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