The Federal Trade Commission is having a very busy week, announcing settlements in three high profile cases all before the close of business Tuesday.
The FTC today announced a settlement with MoneyGram International, Inc., the second largest provider of money transfer services in the U.S., which allegedly facilitated a host of fraudulent activities undertaken by telemarketers and other con artists. The FTC charged that these practices violated both the FTC Act and the Telemarketing Sales Rule. MoneyGram has agreed to pay $18 million into a fund that will be used to pay restitution to consumers for facilitating fraud on American consumers from Canada. The $18 million settlement represents MoneyGram’s total return on $84 million in fraudulent transactions. The settlement further requires implementation of a comprehensive anti-fraud program that is reminiscent of the Identity Theft Prevention Programs mandated by the FTC’s Red Flags Rule, including employee training and ongoing monitoring to detect fraud.
The FTC also announced today a settlement with Iconix Brand Group, Inc., which owns, licenses and markets apparel brands including Candie’s, Mudd, Bongo and OP. The FTC alleged violations of the Children’s Online Privacy Protection Act ("COPPA") and Section 5 of the FTC Act. As to the COPPA violations, the FTC noted that several of the brands’ websites collected full dates of birth, presumably putting the company on notice that it had collected information from individuals under the age of 13 although it did not notify parents in advance or seek their consent. In addition, the brands’ privacy statements included a representation that the company does not "seek to collect" personal information from individuals under the age of 13, which the FTC charged was a deceptive trade practice in violation of Section 5 of the FTC Act. Iconix agreed to pay $250,000 in civil money penalties and to delete all information collected and maintained in violation of COPPA, in addition to other equitable measures such as training employees.
Yesterday, the FTC announced that ChoicePoint, Inc. agreed to strengthen its data security in order to settle charges that it failed to implement a comprehensive information security program as required by the earlier consent order it entered into with the agency following its well-publicized 2005 security breach. This agreement, which expands the company’s obligations under the original consent order, follows a security breach that occurred in 2008. ChoicePoint allegedly turned off a security feature used to monitor access to one of its databases and failed to detect that the feature was disabled for four months. During that period, the FTC alleged that the personal information of 13,750 people was compromised, putting them at risk of identity theft. In addition to paying $275,000 to be used for consumer redress, the modified court order requires ChoicePoint to report to the FTC every two months for the next two years, providing "detailed information about how it is protecting the breached database and certain other databases and records containing personal information."
The three cases, following closely on the heels of seven Safe-Harbor-related settlements, demonstrate the FTC’s resolve to enforce more aggressively and levy larger fines when settling cases.