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FTC Fails To Pay ChoicePoint Victims

By Martin H. Bosworth
ConsumerAffairs.com

September 22, 2006

ChoicePoint • Lexis-Nexis Parent To Buy ChoicePoint • ChoicePoint Settles Data Breach Lawsuit • More ChoicePoint Identity Theft Victims Identified • ChoicePoint Settles With Attorneys General Over Data Breach • FTC Finally Sets Up Redress For ChoicePoint Victims • ChoicePoint Names a "Consumer Advocate" • FTC Fails To Pay Victims Of ChoicePoint Data Breach • ChoicePoint Gets a Makeover • Data Blunders Cost ChoicePoint $15 Million • Guilty Plea in ChoicePoint Data Theft • ChoicePoint Finds More Cases Of Illegal Data Access • ChoicePoint Responds • PATRIOT Act Further Empowers ChoicePoint • Previous Data Thefts Went Unreported • Consumers Will Be Able to See Their ChoicePoint Records, Company Says • Nigerian Sentenced to Prison in ChoicePoint Theft • State Tally of ChoicePoint Victims • ChoicePoint Breach Worse Than First Reported • Is National Security Compromised by ID Theft? • States Demand ChoicePoint Notify ID Theft Victims • Private Information Stolen from Nationwide Consumer Database

Nearly a year after the Federal Trade Commission (FTC) wrangled a $5 million settlement from ChoicePoint for the sale of 145,000 customer records to a band of Nigerian identity thieves, none of the victims have seen a dime of the money.

Nor has the FTC set up a mechanism to distribute the money, or even provided any information to affected consumers as to how they can apply for compensation from the fund.

The FTC's process for distributing and administering the fund is still "under review," according to agency spokespersons.

The FTC claimed it was also continuing to identify and verify the identities of the approximately 800 confirmed victims of the data breach, and that it hoped to complete the process soon, the Associated Press reported.

The $5 million victims' fund was part of a $15 million settlement levied on ChoicePoint by the FTC, the largest of its kind.

The Alpharetta, GA-based data broker claimed that it paid the full fine at the time of the settlement, and vice president Matt Furman said that he had "full faith that the FTC is working hard to come up with a process to ensure that the money we contributed to help consumers is wisely spent for the benefit of anyone actually affected."

Congressman Ed Markey (D-Mass.) criticized the FTC for not moving fast enough to disburse the compensation or providing information on how to apply for it.

In a press relase, Markey said that "ChoicePoint's ID theft victims should be compensated immediately to protect themselves and their families from having their Social Security numbers, health records and bank account balances used by identity thieves."

Markey's office published a letter to FTC chairwoman Deborah Platt Majoras asking for more specific information on the FTC's progress in disbursing the funds.

Referring to the confirmed theft victims, Markey asked "Why has the Commission chosen not to compensate these individuals now, while at the same time continuing to work to identify additional victims?"

The disclosure regarding the victims fund came on the heels of the FTC's identity theft task force releasing new recommendations for handling data breaches and major cases of fraud. The FTC recommended creation of a "universal police report" that would make it easier for victims of identity theft to file their claims.

Ironically, the task force also recommended amending Congressional statutes to ensure defendants in an identity theft case pay restitution to the victims for time spent dealing with the effects of the crime.

Back In The Spotlight

The ChoicePoint data breach was a watershed for the epidemic of identity theft and data fraud. The breach took place in California, and its strong consumer protection laws mandated that ChoicePoint notify the authorities and involved consumers. That led to a flood of disclosures of data breaches and laptop thefts by other companies, as well as a guilty plea for theft ringleader Olatunji Oluwatosin.

Since the theft was revealed, ChoicePoint has worked overtime to assure customers, the press, government, and the stock market that they have cleaned up their act and have instituted new privacy controls on the billions of records they sell and share to industry.

In an interview with ConsumerAffairs.com in July, ChoicePoint CEO Doug Curling insisted that his company has learned its lesson from the data breach and was turning over a new leaf.

A study released by the Gartner research and analysis firm claimed that ChoicePoint has undergone extensive auditing by the FTC and other agencies, and has improved its own security practices by randomly auditing customers to ensure they aren't misusing data.

Gartner analyst Avivah Litan warned that though ChoicePoint may be improving, both it and other data brokers need to continue refining both their collection practices and business culture, in order to prevent further breaches.

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