• by Wendy Davis  @wendyndavis, June 30, 2010

Online data aggregator and broker Spokeo, which offers detailed financial reports about individuals, is violating a federal consumer protection law, the digital rights group Center for Democracy & Technology alleged on Wednesday.

"Despite offering credit ratings and promoting the use of its services for employment decisions, Spokeo does not offer consumers any of the protections encoded in the Fair Credit Reporting Act as required by law," the watchdog group alleges in a complaint filed with the Federal Trade Commission. "Consumers have no access to the data underlying Spokeo's conclusions, are not informed of adverse determinations based on that data, and have no opportunity to learn who has accessed their profiles."

Spokeo allows users to search for highly detailed information about individuals. The site gleans information from a variety of databases, including social networking sites like LinkedIn and MySpace. It offers some basic information for free -- including people's addresses, phone numbers, estimated age and household composition -- and sells other data, like estimates about users' wealth and credit. Some observers have said that the quality of data on the site is mixed, with some information clearly wrong but other data correct.

The Center for Democracy & Technology argues that the company should be required to follow the federal Fair Credit Reporting Act, which allows consumers to see -- and challenge -- the information that goes into their credit reports. That law also has other protections, including a provision that allows consumers to learn who has accessed reports about them.

"Although Spokeo offers detailed -- although erratic -- insight into millions of American consumers, the site has few controls in place to protect those consumers' rights," the complaint alleges.

Among other items, the group is asking the FTC to order Spokeo to follow the practices outlined in the Fair Credit Reporting Act, including allowing consumers to access -- and challenge -- the data relied on to evaluate their financial circumstances.

Spokeo said on Wednesday that it is not a credit reporting agency and doesn't issue consumer reports. "Indices that are sometimes mistaken for actual credit information are in reality marketing profiles derived from a variety of sources, not unlike those advertisers have been relying upon for decades," the company said in a statement. "Hence, the type of information we offer is not governed by the Fair Credit Reporting Act."

In addition, the site's terms of service say that visitors are not allowed to use the information on Spokeo to assess consumers' credit eligibility, suitability for employment or other purposes covered by the Fair Credit Reporting Act.

The company also allows people to opt out of the database, but some users say they have found themselves restored after a change in circumstances, says Justin Bookman, senior resident fellow at the Center for Democracy & Technology. "It's better than nothing, but I have heard complaints from people that it doesn't work very well," Bookman says of the site's opt-out feature. "They don't have the procedures in place to make opting out sticky."

While the complaint only targets Spokeo, Bookman says that the Center for Democracy & Technology is concerned about the space more broadly. "One of the reasons we brought the complaint is because we think there are a lot of problems with the data broker industry," he says.