FTC: Software used by rent-to-own stores spied on customers

The U.S. Federal Trade Commission has reached proposed settlements with a software vendor and seven rent-to-own stores after the agency accused them of installing spyware on rented computers that captured screenshots of personal information, logged keystrokes and, in some cases, took webcam pictures of people in their homes.

The software, from DesignerWare of North East, Pennsylvania, 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, the FTC alleged. An add-on program, called Detective Mode, helped the rent-to-own stores locate rented computers and collect late payments, the agency alleged.

However, DesignerWare owner Timothy Kelly said the FTC has "grossly misunderstood" the purpose of PC Rental Agent, an antitheft software package. The software is designed to track down stolen computers, and it's against the terms of service to use the software to spy on rental customers, he said.

"We have never been informed by anyone that anyone misused the software," Kelly said. "The FTC has never produced to us anyone misusing the software."

The small firm settled the FTC's complaint because it would have been too costly to fight the agency, Kelly said.

But the FTC alleged that DesignerWare's software helped spy on rent-to-own customers who were late on their payments. Kelly testified in a 2011 trial that the software can lock a delinquent customer out of the computer.

As of August 2011, more than 1,600 rent-to-own stories in the U.S., Canada and Australia had licensed PC Rental Agent, the FTC said in its complaint against DesignerWare. The software has been installed on about 420,000 computers, the FTC said.

PC Rental Agent is not detectable to a computer's user and the computer's renter cannot uninstall it, the FTC said. DesignerWare recommends, but does not require, its licensees to disclose the presence of PC Rental Agent on a rented computer, the agency alleged.

"An agreement to rent a computer doesn't give a company license to access consumers' private emails, bank account information, and medical records, or, even worse, webcam photos of people in the privacy of their own homes," Jon Leibowitz, the FTC's chairman, said in a statement. "The FTC orders today will put an end to their cyber spying."

Data gathered by DesignerWare and provided to rent-to-own stores using Detective Mode revealed, in some cases, user names and passwords for email accounts, social media websites, and financial institutions, the FTC alleged. The software also revealed Social Security numbers, medical records, private emails to doctors, bank and credit card statements, as well as webcam pictures of children, partially undressed individuals, and intimate activities at home, the agency alleged.

The FTC charged that DesignerWare engaged in an unfair business practice by licensing and enabling Detective Mode, gathering personal information about renters, and disclosing that information to the rent-to-own businesses. The agency also alleged that DesignerWare's use of geolocation tracking software without first obtaining permission from the computers' renters and notifying the computers' users was unfair and illegal.

The seven rent-to-own companies were charged with breaking the law by secretly collecting consumers' confidential and personal information and using it to try to collect money from them.

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. The orders also 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.

The proposed settlements contain record-keeping requirements to allow the FTC to monitor compliance with the orders for the next 20 years.

Those named in the FTC's complaints include DesignerWare, and owners Timothy Kelly and Ronald Koller; Aspen Way Enterprises; Watershed Development; Showplace Rent-to-Own; J.A.G. Rents, a franchisee of the ColorTyme rent-to-own chain; Red Zone, also a franchisee of ColorTyme; B. Stamper Enterprises, a franchisee of Premier Rental Purchase; and C.A.L.M. Ventures, also a Premier Rental Purchase franchisee.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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