FTC Sends Warning To Mobile App Developers

by Wendy Davis, Feb 7, 2012, 8:51 PM

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The Federal Trade Commission has warned three online data brokers that their mobile apps must comply with the federal Fair Credit Reporting Act.

"If you have reason to believe that your background reports are being used for employment or other FCRA purposes, you and your customers who are using your reports for such purposes must comply with the FCRA," FTC associate director Maneesha Mithal says in the letters, which were sent to Everify, InfoPay and Intelligator. Mithal doesn't allege that those companies have violated the fair credit law, but says the FTC reserves the right to bring charges in the future.

The federal fair credit law provides that reporting agencies must take steps to ensure the accuracy of background reports used for employment, housing and credit. The law also gives consumers the right to challenge information in those reports.

The FTC's letters focus specifically on mobile apps that provide information about whether people have criminal records. "Employers are likely to use such criminal histories when screening job applicants," the letter states.

The companies appear to gather information about people from a broad array of sources, including social networking sites. One of the companies to receive a letter, Everify, says it offers a "Social Media Check" tool, which scours the Web for photos, videos, blogs, profiles and other information.

Mithal warns the companies that they must comply with the law's requirements if they have reason to believe the reports are being used for employment, housing, credit or credit decisions -- even if their Web sites have disclaimers saying that the reports shouldn't be used for those purposes. "We would evaluate many factors to determine if you had a reason to believe that a product is used for employment or other FCRA purposes, such as advertising placement and customer lists."

The FTC's recent letters deal with mobile apps, but numerous companies sell data about consumers through Web sites. One of those companies, Spokeo, was sued for violating federal fair credit laws by allegedly failing to allow consumers to correct inaccuracies in its reports.

U.S. District Court Judge Otis Wright II in the Central District of California dismissed the lawsuit on the ground that the user who sued didn't show he was injured. The user appealed and the case is currently pending in the 9th Circuit.

The digital rights group Center for Democracy & Technology also complained about Spokeo to the FTC. Regulators haven't yet said whether they intend to bring charges against Spokeo.

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