The Federal Trade Commission ("FTC") recently announced the settlement of a lawsuit against ITMedia Solutions LLC and its affiliates (collectively "ITMedia") for allegedly violating certain lead generation marketing laws. The FTC complaint alleged that ITMedia's websites misled consumers into disclosing their sensitive financial information under the pretext that they would be connected with lenders when, in reality, such information was predominately sold to marketing companies. The underlying allegations against ITMedia and the associated settlement agreement should serve as a cautionary tale to lead generators and their marketing affiliates.
What Were the Lead Generation Marketing Violation Allegations?
The FTC alleged that ITMedia misled consumers and sold their data without permission. In its complaint, the FTC argued that ITMedia's websites were designed to trick consumers looking for loans into sharing their sensitive financial information (e.g., Social Security numbers and bank account information). ITMedia websites (including cashadvance.com, personalloans.com and badcreditloans.com) purportedly "promised consumers that their information would be shared with '. . . our network of trusted lenders . . .' or would '. . . only be shared with qualified lenders.'"
Instead, the FTC alleged that "84 percent of the loan applications collected through these websites since January 2016 were not sold to lenders, but instead disseminated to an array of marketers, debt relief and credit repair sellers, and companies that would resell consumers' information without regard for how the information would be used." The FTC complaint emphasized that "the harm to consumers from ITMedia's 'indiscriminate' selling of consumer data was substantial, putting them at risk for identity theft and scams."
In addition, the FTC alleged that ITMedia violated the Fair Credit Reporting Act ("FCRA") by "unlawfully obtaining and reselling the credit scores of consumers who submitted information." Pursuant to the FCRA, businesses are limited in how and when they may obtain and use consumer credit scores. Specially, companies may not use such credits scores to market leads to third-party buyers.
Lead Generation Marketing Violation Settlement
Following an investigation, ITMedia agreed to pay $1.5 million to settle the FTC proceeding. As part of the settlement, ITMedia is now prohibited from selling consumers' personal information outside of a limited set of circumstances. Where permitted to share consumer personal information, ITMedia must establish procedures to verify recipients' need for, and monitor their use of, such information.
This settlement highlights the important fact that lead generators must properly disclose the purpose(s) for which they collect and share consumer personal information. If lead generators communicate to consumers that they will only sell their information to one class of buyers (e.g., lenders), they can only sell to such buyers. In addition, lead generators cannot request consumer credit scores if such information may be sold to marketers.
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