## Facts

- Spokeo, Inc. compiled consumer information from many sources, including social-media websites and other data sellers, and used that information to create online profiles about individuals.
- The profiles included identifying and demographic data such as a person’s name, physical address, email address, phone number, marital status, and age, and (as alleged) could also include other personal details Spokeo could compile.
- Spokeo sold access to these profiles to paying subscribers, and the government alleged the service was marketed to and used by human-resources, recruiting, and background-check businesses to evaluate job candidates.
- In 2010, Spokeo revised its terms of service to state that users could not use the website for activities covered by the Fair Credit Reporting Act (FCRA) and that Spokeo was not a consumer reporting agency.
- The Federal Trade Commission investigated Spokeo and authorized referral to the Attorney General for federal civil enforcement.
- Acting upon the FTC’s notification and authorization, the United States filed a complaint in the U.S. District Court for the Central District of California seeking civil penalties, injunctive relief, and other relief for alleged violations of the FCRA and Section 5(a) of the Federal Trade Commission Act (FTC Act).
- The complaint alleged that Spokeo acted as a “consumer reporting agency” and that the profiles it furnished were “consumer reports,” including when provided for employment-related evaluation and other FCRA-covered purposes.
- The government alleged that Spokeo’s terms-of-service revision did not stop FCRA-covered uses because Spokeo did not take sufficient steps to confirm that existing users stopped using reports for those purposes.
- The government also alleged that Spokeo did not request and verify the identity of users obtaining reports and did not verify users’ intended uses or permissible purposes before furnishing reports.

## Issues

1. Whether, as alleged, Spokeo’s collection and sale of consumer profiles for use in employment or other eligibility decisions made Spokeo a consumer reporting agency furnishing consumer reports under the FCRA.
2. Whether, as alleged, Spokeo failed to use reasonable procedures to limit furnishing of reports to permissible purposes and to provide required notices and certifications related to the use of consumer reports.
3. Whether the alleged FCRA-related conduct also constituted unfair or deceptive acts or practices under FTC Act § 5(a), subject to federal enforcement.
4. Whether the case should be resolved through a stipulated final judgment imposing civil penalties and permanent injunctive and compliance requirements without litigation on the merits.

## Decision

- The district court entered a Stipulated Final Judgment and Order for Civil Penalties, Permanent Injunction, and Other Equitable Relief, resolving the case by consent rather than trial.
- Spokeo was ordered to pay $800,000 in civil penalties.
- The order permanently enjoined Spokeo from violating the FCRA provisions identified in the decree (including FCRA §§ 604, 607(a), 607(d), and 621).
- The order required Spokeo to implement procedures designed to prevent furnishing consumer reports except for permissible purposes, including measures related to verifying users and intended uses and providing required notices to users.
- The order imposed compliance administration requirements typical of federal consumer-protection settlements, including recordkeeping and reporting to the government.
- Spokeo did not admit liability (other than jurisdictional facts) and agreed to entry of the order to resolve the matter; it also waived rights to challenge the order.

## Legal Principles

- An entity that assembles or evaluates consumer information and provides it to third parties for use in employment or other eligibility determinations may fall within the FCRA’s definitions of “consumer reporting agency” and “consumer report,” depending on the nature and use of the information.
- FCRA § 604 limits the permissible purposes for which consumer reports may be furnished; furnishing for employment purposes triggers specific statutory conditions.
- FCRA § 607(a) requires reasonable procedures aimed at limiting the furnishing of consumer reports to parties with permissible purposes; contractual disclaimers alone may be inadequate if distribution practices do not include meaningful checks.
- FCRA § 607(d) requires consumer reporting agencies to provide specific notices to users of consumer reports regarding their duties under the statute.
- The FTC may pursue alleged FCRA violations through mechanisms provided by the FTC Act, including seeking civil penalties and injunctive relief through an action brought by the United States after FTC authorization.
- A consent decree binds the parties and sets enforceable duties and prohibitions, but it is not a litigated determination of disputed facts or legal questions and generally includes no admission of liability.

## Conclusion

United States v. Spokeo, Inc. was a federal enforcement action in the Central District of California, brought by the United States on FTC authorization, alleging that Spokeo furnished consumer-profile information as consumer reports for employment and other FCRA-covered uses without required procedures and notices; the case ended in a consent decree requiring an $800,000 civil penalty and ongoing injunctive and compliance measures.


United States v. Spokeo, Inc., No. CV12-05001MMM(JHx) (2012)