Spokeo to pay $800k under FTC settlement; accused of misusing data

A California firm that scoured social-media sites and other sources to compile profiles of consumers for potential employers agreed to pay $800,000 under a settlement with the Federal Trade Commission, which accused the firm of misusing the data it collected.

The deal with Spokeo Inc., announced Tuesday, marks the first time the FTC has addressed the sale of Internet and social-media data for employment-screening purposes.

Spokeo pulled information — such as address, marital status, hobbies, ethnicity and religion — from Facebook, Twitter and other sources to create profiles that it sold to job recruiters from 2008 until 2010.

But the FTC alleges that Spokeo ran afoul of the law that governs use of consumer information, including data gathered to determine job eligibility. Spokeo functioned as a consumer reporting agency but failed to follow the rules imposed on such agencies.

For instance, it did not take adequate steps to verify the accuracy of the information it was disbursing, the FTC said. It also failed to inform recruiters who used the information of their obligations, including the need to notify consumers if they were rejected for a job based on the Spokeo profile.

“Consumers didn’t realize that these reports were used as a factor in determining whether they would get a job,” said Jamie Hine, a staff attorney at the FTC. “If the report was riddled with errors, the consumer didn’t have recourse.”

The FTC also alleges that the firm represented the endorsements it used on various sites and blogs as being independent, even though they were created by Spokeo employees.

Spokeo did not admit any wrongdoing when it agreed to the terms of the settlement.

Harrison Tang said that when he and a some of his Stanford University classmates created Spokeo in 2006, they did not intend for the start-up to function as a consumer reporting agency. Instead, it was a tool to help people connect with each other.

A few years ago, the company was “eager to share our social network search tool with anyone who could find good use for it,” Tang said in a statement. Spokeo has since changed its site and business practices to address the FTC’s concerns, he said. The firm no longer has a section devoted to recruiters and hiring professionals, for instance.

Spokeo also allows users to remove their profiles from the site.

“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,” Tang said.

Starting in 2010, Spokeo stated on its Web site that the information it provides cannot be used for job screening and other specific purposes. But the FTC said the disclaimer did not go far enough, because the company did not actively reach out to existing subscribers to the inform them that they could no longer use the data for those purposes.

The complaint, which has yet to be finalized, was filed by the Justice Department on behalf of the FTC in the federal district court in Los Angeles.

 
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