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 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 said 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 action, Spokeo issued a statement that in part read: "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."
Aside from the Spokeo action, the FTC earlier this year sent letters to six unidentified mobile applications makers warning them that their background screening apps may be violating federal statutes. Specifically the FTC said if the app makers have reason to believe their background reporting apps are being used for employment screening, housing, credit or other similar purposes, they must comply with the Fair Credit Reporting Act which is supposed to protect consumer privacy and ensure that the information supplied by consumer reporting agencies is accurate.