FTC and State AG Team Up on Rental Spying Debt Collection Case

The Federal Trade Commission (FTC) and Illinois Attorney General Lisa Madigan this week announced a settlement with a rental company that digitally spied on consumers who had leased laptop computers. Madigan said the company used the spyware as a debt collection tool to locate customers who had fallen behind on as little as one payment on their lease agreement.

The FTC reached settlements with seven companies that operate rent-to-own stores, including franchisees of Aaron’s, ColorTyme, and Premier Rental Purchase. Madigan joined in the action against Watershed Development Corporation, a franchisee of Aaron’s Inc., which operates stores throughout northwest Illinois. The FTC also named in its action DesignerWare, LLC, a company that licensed software to rent-to-own stores to help them track and recover rented computers.

According to the FTC’s complaint, DesignerWare’s software contained a “kill switch” the rent-to-own stores could use to disable a computer if it was stolen, or if the renter failed to make timely payments. DesignerWare also had an add-on program known as “Detective Mode” that purportedly helped rent-to-own stores locate rented computers and collect late payments.  DesignerWare’s software also collected data that allowed the rent-to-own operators to secretly track the location of rented computers, and thus the computers’ users.

The complaint alleged that the software captured screenshots of confidential and personal information, logged users’ computer keystrokes, and in some cases took webcam pictures of people in their homes, all without notice to, or consent from, the consumers.

Data gathered by DesignerWare and provided to rent-to-own stores using Detective Mode revealed private and confidential details about computer users, such as user names and passwords for email accounts, social media websites, and financial institutions; Social Security numbers; medical records; private emails to doctors; bank and credit card statements; and webcam pictures of children, partially undressed individuals, and intimate activities at home, according to the FTC.

The proposed settlement orders will ban the software company and the rent-to-own stores from using monitoring software like Detective Mode and will ban them from using deception to gather any information from consumers.  They also will prohibit the use of geolocation tracking without consumer consent and notice, and bar the use of fake software registration screens to collect personal information from consumers.

In addition, DesignerWare will be barred from providing others with the means to commit illegal acts, and the seven rent-to-own stores will be prohibited from using information improperly gathered from consumers in connection with debt collection.  All the proposed settlements contain record keeping requirements to allow the FTC to monitor compliance with the orders for the next 20 years.