June 13, 2012, 11:38 AM — Spokeo, a company that aggregates and sells public data on individuals from numerous online and offline sources, has agreed to pay $800,000 to settle Federal Trade Commission (FTC) charges that it improperly marketed the information to employers and recruiters.
The FTC's settlement order, announced on Tuesday, also bars Spokeo from making misrepresentations about the endorsements it receives from clients and requires the company to clearly disclose any material relationships it may have, with endorsers of its service.
In a statement, the FTC noted that the Spokeo settlement marks the first time the commission has addressed the aggregation and sale of internet and social media data for employment screening purposes.
Spokeo describes itself as a "people search engine" that merges offline information such as an individual's address, marital status and email addresses with social network data about that person gathered from Facebook, Twitter feeds and other online sites. According to the FTC, the consumer profiles created by the company contain information such as an individual's name, address, age range, hobbies, religion, ethnicity, participation in social media networks and other details.
Spokeo then marketed the profiles to headhunters, human resource firms and background screening companies without verifying the accuracy of the data or informing its customers about their obligation to only use the data in compliance with the Fair Credit Reporting Act (FCRA), the FTC noted.
"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," the FTC noted in its statement.
Between 2008 and 2010, Spokeo actively marketed its consumer profiles on a subscription basis to HR professionals, recruiters and employment-screening services. The company ran advertisements to attract customers from these fields and posted misleading endorsements to make it appear as if other customers and businesses supported Spokeo's services, the FTC noted.
The FTC's investigation stems from a complaint filed in 2010 by the Center for Democracy and Technology (CDT). In its 24-page complaint, the CDT accused Spokeo of offering credit estimate and "wealth level" ratings on millions of American's based on inaccurate and incomplete data on consumers gathered from numerous online and offline sources.