FTC: Data Brokers That Compile Tenant Data May Be Covered by FCRA

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On April 3, 2013, the Federal Trade Commission issued a press release that marks yet another step in its continuing trend of actions involving data brokers and data providers. As we have noted in earlier blog posts, the agency is making a concerted effort on a number of fronts to enforce the laws that protect consumer data and privacy.

The FTC’s current action involves a letter that it sent to a number of data brokerage companies that provide tenants’ rental histories to landlords. The letter is simply a notification to the companies that they may be considered credit reporting agencies under the Fair Credit Reporting Act (FCRA) and that they thus may be required to ensure that their websites and practices comply with that law.

The FTC letter also listed some of the obligations of credit reporting agencies to take reasonable steps to ensure the fairness, accuracy, and confidentiality of their reports — such as (1) ensuring that landlords are actually using the report for tenant screening purposes and not as a pretext, (2) ensuring the maximum possible accuracy of the information in the tenant reports, (3) if the company is a nationwide provider, providing consumers with a free copy of their report annually, and (4) ensuring that all obligations are met concerning notifications to landlords (e.g. letting consumers know about a denial based on a tenant report, the right to dispute information in the report, and the right to get a free copy of the report).

The FTC letter specifically noted that the agency has not evaluated whether the company receiving the letter is in compliance with the FCRA but that “we encourage you to review your websites and your policies and procedures for compliance.”

We have discussed FTC actions against data brokers before. In March, we discussed the FTC’s announcement of a settlement with Compete, Inc., a web analytics company. Compete sells reports on consumer browsing behavior to clients looking to drive more traffic to their websites and increase sales. Compete obtained the information by getting consumers to install the company’s web-tracking software in their computers. The FTC alleged that the company’s business practices were unfair and deceptive because the company did not sufficiently describe the types of information it was collecting from its users.

We are confident that the companies that received the letter regarding tenant information are reviewing their websites and polices, as encouraged by the FTC. However, what really intrigues us is the motivation behind the FTC sending the letters to the companies.

Of course, part of that motivation is to help ensure that the companies follow rules for privacy protection. Nonetheless, it is also interesting to note that there is a significant consequence under the FCRA – namely, individuals are permitted to seek punitive damages for deliberate violations of the FCRA. Thus, the letter arguably provides notice for the companies to become compliant immediately since future violations may be considered deliberate breaches that warrant punitive damages.