June 13, 2012 at 1:07 PM ET
"FYI EVERYONE -- There's a site called spokeo.com and it's an online phone book that has a picture of your house..," begins the breathless chain email, which has made its way around the Internet for the past three years or so. It'd be hard to find an email inbox or Facebook wall that hasn't been disrupted by the scary warning.
It sounds like typical urban legend spam: but Spokeo is quite real. So real, in fact, that the site was just slapped with an $800,000 fine by the Federal Trade Commission for alleged deception and violations of the Fair Credit Reporting Act.
Spokeo agreed to pay the fine without admitting any wrongdoing; but it certainly doesn't shy away from the Big Brotherish accusations. On its home page Wednesday, despite the fine, is this tag line: "Not your grandma's phone book."
Most Web users have heard of Spokeo because of the chain email and online posts, some of which make even scarier claims, like this: "It's an online phonebook that has a picture of your house, credit score, profession, age, how many people live in the house," claims one version, begging to go viral. "Remove yourself AND ANY AKA OR SPOUSE by the Privacy button on the bottom right. (passing along, scary stuff!) I have personally checked it out ... and it is really there! CUT PASTE AND REPOST!!!"
Spokeo is a common data background company. Along with a host of competitors, it compiles ragged, incomplete and often inaccurate dossiers on U.S. residents. It does a pretty good job of finding people's home addresses, and then bulks up its reports (that is, tries to get snoopers to pay extra) to see additional vague data, such as average income in your neighborhood. It's no scarier that dozens of other such services. But unlike companies such an Intellius, Spokeo has fully embraced the spooky nature of its business (the name should tell you that) and used it as a marketing tool.
It appears that marketing plan may have cost the firm $800,000, though the FTC didn't sue Spokeo for being spooky. The consumer agency said Spokeo marketed itself to human resource professionals as an employment background company, using the tagline "Explore Beyond the Resume." But acting as a credit reporting agency triggered the Fair Credit Reporting Act, which includes a list of legal obligations, such as giving consumers a process to challenge incorrect information, for example. Spokeo did not comply with them, according to the FTC .
Doing so won Spokeo this distinction: It became the first firm sued by the FTC for sale of data collected from online sources, including social media, for employment screening purposes.
Spokeo did not immediately respond to requests for comment. Founder Harrison Tang did publish a blog post called "Empowering Spokeo's Users" which said the firm has changed its business practices.
"It has never been our intention to act as a consumer reporting agency," he wrote. "We have made changes to our site and our internal business practices in order to ensure we don’t infringe upon the FCRA’s important consumer protections, and to ensure an honest and transparent service that will continue to be easy for our customers to use."
In case Spokeo's reputation needed an even heavier anchor, the FTC also said the firm violated its endorsement rules, sprinkling inauthentic praise about Spokeo all around the Web.
"Spokeo deceptively posted endorsements of their service on news and technology websites and blogs, portraying the endorsements as independent when in reality they were created by Spokeo's own employees," the FTC says.
Let that be a healthy reminder to content creators: Fake comments, discussions and company plugs aren't just bad form. They are illegal.
As part of the fine, Spokeo has agreed to stop acting like a credit reporting agency and to stop spreading fake endorsements around the Internet. But back to the original point: If Spokeo's line of business is so scary that it can make Internet chain mails into reality, why is it allowed to exist in the first place?
FYI EVERYONE: Weak U.S. privacy laws, that's why. See for yourself a picture of your house. No address required. Feel free to forward this to everyone you know! And while you're at it, visit http://spokeo.com/privacy to opt out of the company's database. Scroll to the bottom for the essentials.
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