The data broker, LeapLab of Chandler, Ariz., allegedly sold sensitive material about payday loan applicants -- including their social security numbers -- to a company it knew had no “legitimate” use for the information, according to the FTC. That company, Ideal Financial Solutions, then allegedly used that information to siphon money from the loan applicants' bank accounts.
Ideal Financial, which allegedly stole more than $47 million from consumers over a four-year period, is the subject of a separate FTC action filed in 2013.
The FTC's complaint against LeapLab includes some legal theories that could have a big impact on other data brokers. Specifically, the FTC says that LeapLab engaged in an unfair business practice by selling sensitive data to companies that "have no legitimate need” for it.
In addition to Ideal Solutions, LeapLab allegedly sold information about loan applicants to telemarketers and email marketers, who “made unsolicited sales offers to the consumers,” according to the FTC.
The allegations suggest that the FTC believes data brokers should vet the companies that purchase information. But it's not clear that a judge will agree that merely selling data without vetting recipients is an unfair business practice.
In this case, however, a judge might be able to rule for the FTC without accepting the theory that data brokers can only sell to companies they believe are “legitimate.”
That's because the FTC also alleges that LeapLab ignored warnings from one of its own executives about Ideal Solutions. LeapLab's chief marketing officer, Brian Jensen, allegedly also worked at Ideal Solutions, where he served as vice president of marketing between 2009 and 2012.
In May of 2012, Jensen allegedly informed LeapLab that Ideal Financial was using information from payday loan applications in order to steal from consumers. But LeapLab continued to sell data to Ideal through October of 2012, according to the FTC.
The FTC's complaint, filed today in federal court in Phoenix, Ariz., seeks an order prohibiting LeapLab from engaging in an unfair practice. The FTC also wants LeapLab to disgorge any profits it made through the sales.