September 27, 2012

The Spy Who….Rented to Me?

Consumer Advertising Law Blog

This week, in a creepy turn of events, the FTC announced that seven rent-to-own companies and a software design firm agreed to settle charges with the agency and the Illinois Attorney General, who alleged that these companies spied on consumers without their knowledge. Yeah, spied. And not in a cool, James Bond kind of way. The FTC reported that a whole slew of rent-to-own companies (like Aaron's, ColorTyme and Premier Rental Purchase) used software licensed to them by DesignWare, LLC to snoop on consumers who rented computers from them. The software allegedly captured screenshots of personal information, computer key strokes and even, in some cases, webcam pictures of the consumers in their homes. All of this was done in secret agent style, without the consumers' awareness.

According to the FTC complaint, DesignWare created the software to include a "kill switch" so rent-to-own companies could totally lock down any computers that were subject to past due rental payments or were stolen. The software also included an add-on program called "Detective Mode" that supposedly helped the rent-to-own companies secretly track the computers so they could collect outstanding payments and locate lost machines. It was this "Detective Mode" aspect of the software that allowed logging of key strokes, capturing of screen shots and shooting of video using the computer's web cam. The data gathered by the software included all sorts of confidential information, including user names and passwords, social security numbers, bank and credit card statements, medical records and whatever sorts of things people might do with their webcam (we'll just leave that one alone). All of this tracking and capturing and video-taking was done without obtaining the consumers' consent, or even telling them about it at all. Another problem? The software popped up a fake registration screen that duped people into giving their personal contact and location information to the rental stores.

FTC Chairman Leibowitz said, in response to these allegations of cyber-spying, that agreeing to rent a computer from a company doesn't amount to a blanket license to access your personal information (or shoot video of you in the privacy of your own house) while you're using the computer. The FTC charged that the activities of both DesignWare, and the rent-to-own companies were unfair and deceptive gathering and disclosure of personal information that violates Section 5 of the FTC Act. The agency also argued that using geolocation tracking software (which sounds very sleuth-like) without first getting the renter's permission, or notifying the renter, was illegal and the use of fake registration forms was deceptive.

The proposed settlement order will ban DesignWare and the rent-to-own companies from using this type of monitoring software and will prohibit the use of geolocation tracking without notifying and obtaining permission from the consumer. The rent-to-own companies will also not be able to use any of the information to collect outstanding debts from consumers. The agency is publishing a description of the consent package in the Federal Register for public comment. Want to publish a comment?

So, it looks like the lesson to take from this action is: Don't spy on your customers without their knowledge. There really isn't much of a justification for these types of covert tactics to obtain customer information, and they are undeniably a huge invasion of privacy. So, if you want to channel your inner James Bond, best to do it on your own private time. The FTC will try to make sure no one's watching.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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