On December 23, 2014, the Federal Trade Commission ("FTC") announced the filing of a complaint charging a data broker with selling the sensitive personal information of hundreds of thousands of consumers to third parties that used the information unlawfully to debit millions of dollars from the consumers' accounts. The FTC complaint alleges that Sitesearch Corporation, d/b/a LeapLab ("LeapLab") collected payday loan applications and then sold the information not only to payday lenders but also to non-lenders who used the information to conduct unauthorized marketing activities, to resell the information and, in some cases, simply to steal funds from consumer bank accounts.
A payday loan is a short-term, high-interest unsecured loan made to provide funds in anticipation of an upcoming paycheck. Entities known as "publishers" offer to help individuals obtain payday loans by collecting information in loan applications which are transmitted to lenders through data brokers. A payday loan application typically contains an individual's name, address, phone number, employer, social security number, bank account number and bank routing number. According to the FTC complaint, LeapLab, acting as a data broker, not only sold applications to online lenders but also sold applications to non-lender third parties that did not assist individuals in obtaining payday loans. The complaint states that the non-lender third parties included (i) marketers that made unsolicited sales offers to consumers by email, text message and telephone calls; (ii) data brokers that aggregated and re-sold the information; and (iii) phony Internet merchants that used the information to commit fraud by debiting individuals' bank accounts for bogus financial products that the individuals never purchased.
According to the FTC, one of these non-lender third parties, Ideal Financial Solutions, Inc. ("Ideal Financial"), began purchasing data from LeapLab in 2012. The complaint alleges that using payday loan application data purchased from LeapLab, Ideal Financial illegally debited over $4 million from consumer bank accounts. The complaint further alleges that LeapLab knew or had reason to know that Ideal Financial was using the loan application information for unauthorized and illegal purposes.
The FTC brought its action under Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits "unfair or deceptive acts or practices in or affecting commerce." The FTC complaint seeks a permanent injunction against LeapLab as well as other relief as may be necessary to redress injury to consumers, including rescission of contracts, restitution, refunds and the disgorgement of ill-gotten monies.
A link to the FTC's press release, which contains a link to the complaint, is found here.