Office of the Secretary FEDERAL TRADE …...Office of the Secretary United States of America FEDERAL TRADE COMMISSION Washington, D.C. 20580 April 11, 2013 Commenters Expressing General

Office of the Secretary

United States of America

FEDERAL TRADE COMMISSION

Washington, D.C. 20580

April 11, 2013

Commenters Expressing General Support for the Consent Orders

In the Matter of DesignerWare, LLC; Timothy Kelly and Ronald P. Koller; Aspen Way

Enterprises, Inc.; B. Stamper Enterprises, Inc.; C.A.L.M. Ventures, Inc.; J.A.G. Rents, LLC; Red

Zone, Inc.; Showplace, Inc.; and Watershed Development Corp.

File No. 112 3151, Docket No. C-4390 Through Docket No. C-4398

Thank you for your comment regarding the Federal Trade Commission’s consent agreements in

the above-entitled proceeding. The Commission has placed your comment on the public record

pursuant to Rule 4.9(b)(6)(ii) of the Commission’s Rules of Practice, 16 C.F.R. § 4.9(b)(6)(ii),

and has given it serious consideration.

The Commission appreciates your interest in this matter. The Commission is committed to

safeguarding consumer privacy and believes the proposed orders in this matter will substantially

protect consumers and help deter future privacy violations by rent-to-own companies (“RTO

stores”) using monitoring and/or tracking technologies. The proposed orders with DesignerWare

and its owners ban them from using or providing third parties with technology that allows RTO

stores to monitor consumer use of rented computers. The proposed orders with the RTO stores

similarly ban them from using such technology in connection with a covered RTO transaction.1

The proposed orders also prohibit DesignerWare, its owners, and the RTO stores from using

geophysical location tracking technology to gather information from any rented computer

without providing clear and prominent notice to and obtaining affirmative express consent from

the computer’s renter at the time the computer is rented. Computer users must also receive clear

and prominent notice immediately prior to each time tracking technology is activated.

In addition, the proposed orders prohibit DesignerWare, its owners, and the RTO stores from the

deceptive collection of consumer information via fake software registration notices. The RTO

stores are furthered barred from using any information that was improperly gathered from

consumers through any monitoring or tracking software to collect on a consumer rental contract.

DesignerWare, its principals, and the RTO stores must destroy any data that was collected

through any improper use of monitoring or tracking software, and must encrypt any such data

that is collected properly in the future (i.e., pursuant to the requisite notice and consent). Further,

the proposed orders bar misrepresentations about the privacy or security of any personal

information gathered from or about consumers. Should DesignerWare, one of its owners, or an

RTO store violate any term of a final order, it could be liable for civil penalties of up to $16,000

per violation of any term of the order, or up to $16,000 per day in the case of continuing

violations (as provided by Section 5(l) of the FTC Act, 45 U.S.C. § 45(l), as adjusted by 16 CFR

1.98(c)). Given these strong injunctive provisions, the Commission believes that the orders

contain significant relief that will safeguard consumers’ privacy.

Accordingly, the Commission has determined that the public interest would best be served by

issuing the Decisions and Orders in this matter in final form without any modifications. The

final Decisions and Orders and other relevant materials are available from the Commission’s

website at http://www.ftc.gov. It helps the Commission’s analysis to hear from a variety of

sources in its work. The Commission thanks you again for your comment.

By direction of the Commission, Commissioner Wright not participating.

Donald S. Clark

Secretary

1

The proposed orders define “covered rent-to-own transaction” as “any transaction where

a consumer enters into an agreement for the purchase or rental of a computer and the consumer’s

contract or rental agreement provides for payments over time and an option to purchase the

computer.”





April 11, 2013

Commenters Supporting Stronger Penalties









Your comment urges the Commission to impose stronger penalties on the respondents in this

matter. The Commission is committed to safeguarding consumer privacy and believes the

http://www.ftc.gov/

proposed orders will substantially protect consumers and help deter future privacy violations by

rent-to-own companies (“RTO stores”) using monitoring and/or tracking technologies. The

proposed orders ban DesignerWare and its owners from using or providing third parties with

technology that allows RTO stores to monitor computers rented to consumers. The proposed

orders with the RTO stores similarly ban them from using such technology in connection with a

covered RTO transaction..1

The proposed orders also prohibit DesignerWare, its owners, and the

RTO stores from using geographical tracking technology to gather information from any

computer without providing clear and prominent notice to and obtaining affirmative express

consent from the computer’s renter at the time the computer is rented. Computer users must also

receive clear and prominent notice immediately prior to each time tracking technology is

activated.

In addition, the proposed orders prohibit DesignerWare, its owners, and the RTO stores from the

deceptive collection of consumer information via fake software registration notices. The RTO

stores are also barred from using any information that was improperly gathered from consumers

through any monitoring or tracking software to collect on a consumer rental contract.

DesignerWare, its owners, and the RTO stores must destroy any data that was collected through

any improper use of monitoring or tracking software, and must encrypt any such data that is

collected properly (i.e., pursuant to the requisite notice and consent). Further, the proposed

orders bar misrepresentations about the privacy or security of any personal information gathered

from or about consumers.

The Commission lacks authority to seek civil or criminal penalties for the unlawful conduct

alleged in the complaints. However, should a respondent violate any term of a final order, it

could be liable for civil penalties of up to $16,000 per violation of any term of the order, or up to

$16,000 per day in the case of continuing violations as provided by Section 5(l) of the FTC Act,

45 U.S.C. § 45(l), as adjusted by 16 CFR 1.98(c)). Accordingly, the Commission believes that

these orders will provide strong protections for consumers’ privacy.

In light of these considerations, the Commission has determined that the public interest would

best be served by issuing the Decisions and Orders in this matter in final form without any

modifications. The final Decisions and Orders and other relevant materials are available from

the Commission’s website at http://www.ftc.gov. It helps the Commission’s analysis to hear

from a variety of sources in its work. The Commission thanks you again for your comment.


Donald S. Clark

Secretary

1

The proposed orders define “covered rent-to-own transaction” as “any transaction where a

consumer enters into an agreement for the purchase or rental of a computer and the consumer’s


computer.”

http://www.ftc.gov/





April 11, 2013

Commenters Supporting the Use of Monitoring Software









Your comment asserts that one or more of the proposed consent orders in this matter will deprive

owners of rented computers of their ability to locate and retrieve stolen devices. Your comment

also suggests that DesignerWare and rent-to-own (“RTO”) storeowners limited the activation

and use of monitoring technology, such as Detective Mode, to instances where it was necessary

to assist in retrieving a stolen computer. However, as alleged in the Commission’s complaints

against DesignerWare, its owners, and the RTO stores, the circumstances in which Detective

Mode was activated on rented computers was not limited to instances of theft. The complaints

allege that, although DesignerWare recommended that RTO stores install and activate Detective

Mode only to locate and identify the person in possession of a lost or stolen computer, in

numerous instances DesignerWare did not monitor its collection of, or restrict its licensees’

access to, Detective Mode data. Thus, the complaints allege, RTO stores activated monitoring

technology when consumers were late on rental payments and the stores had no reason to believe

the computers had been the subject of criminal theft. Detective Mode enabled RTO stores to

surreptitiously capture highly personal information from consumers who used computers on

which the program was installed. As the Commission’s complaints allege, secretly collecting

private details about individuals and families in their homes can cause consumers substantial

injury.

The Commission believes the proposed orders strike an appropriate balance between protecting

consumer privacy and affirming the ability of these RTO companies to locate stolen property,

using methods that do not place consumers at risk from the disclosure of financial, health, or

other confidential consumer information. The proposed orders ban the respondents’ use of

monitoring technology – such as keystroke logging, taking screenshots of computer users’

activities, and photographing anyone in view of the computer’s camera – in connection with any

covered RTO transaction.1

At the same time, the orders allow them to use geophysical location

tracking technology to aid in locating and recovering stolen computers. Consumer renters must

receive notice of and give their consent to the installation and use of location tracking

technology, and in most instances computer users must receive notice immediately prior to its

activation. The notice requirement may be suspended, however, where the consumer reports the

computer stolen – or there is otherwise a reasonable basis to believe that the computer has been

stolen – and a police report is filed. This provision provides these RTO stores an effective means

to locate and retrieve stolen computers.







Donald S. Clark

Secretary

1




computer.” The prohibition on monitoring does not include consumers’ rental of laptops outside

the RTO context, or any business’s use or rental of laptops, and also does not cover the use of

monitoring technology for non-commercial purposes by private persons (e.g., parents monitoring

their children’s computer use).





April 11, 2013

Commenters Concerned That the Consent Orders Will Increase Consumer Costs






http://www.ftc.gov/




Your comment asserts that one or more of the proposed consent orders in this matter will lead

rent-to-to-own (“RTO”) stores to charge higher prices for renting computers or require

consumers to purchase monitoring software for their rented computers. The Commission

concludes that, based on the facts uncovered during our investigation, the proposed orders are

necessary to protect consumer privacy and help deter future violations of law. The complaints

against DesignerWare, its owners, and the RTO stores allege that respondents licensed, activated,

and surreptitiously used software installed on rented computers to monitor consumers using

rented computers, including by capturing keystrokes, screenshots of computer activities, and

pictures taken by computer webcams. These practices, the complaints charge, caused or were

likely to cause substantial consumer injury. The complaints also allege that the respondents

deceived consumers into providing personal information on fake pop-up software registration

notices. In addition, the DesignerWare complaint alleges that DesignerWare and its owners

harmed consumers by installing geophysical location tracking software on rented computers

without consent from computer renters and contemporaneous notice to computer users.

There is also no reason to believe that the proposed orders will lead RTO stores to raise rental

costs, given that the orders allow stores to locate and retrieve rented computers. Although the

proposed orders ban the respondents from using monitoring technology in connection with any

covered RTO transaction,1

they allow them to use geophysical location tracking technology to

help stores recover computers. Consumer renters must receive notice of and give their consent to

the installation and use of location tracking technology at the time the computer is rented, and in

most instances computer users must receive notice immediately prior to its activation. The

notice requirement may be suspended, however, where the consumer reports the computer stolen

– or there is otherwise a reasonable basis to believe that the computer has been stolen – and a

police report is filed. These provisions provide these RTO stores effective means to locate and

retrieve the computers.

The proposed orders also bar the use of deceptive tactics (including fake software registration

screens) to collect personal information from consumers and prohibit other misrepresentations

about consumer privacy. Similarly, the orders prohibit the use of information gathered from

consumers using deceptive means to collect on consumer rental contracts.







http://www.ftc.gov/

Donald S. Clark

Secretary

1












April 11, 2013

Commenters Concerned About Prohibiting the Use of Monitoring Technology









Your comment objects to one of the proposed consent orders in this matter because you believe it

will prohibit the use of monitoring technology on rented computers. According to your

comment, you believe that this technology enables the recovery of stolen computers and that

barring its use will adversely affect consumers.

The Commission concludes that, based on the facts uncovered during our investigation, the

proposed orders in this matter are necessary to protect consumer privacy and help deter future

violations of law. The complaints against DesignerWare, its owners, and the rent-to-own

(“RTO”) stores allege that respondents licensed, activated, and urreptitiously used software

installed on rented computers to monitor consumers using rented computers, including by

capturing keystrokes, screenshots of computer activities, and pictures taken by computer

webcams. These practices, the complaints charge, caused or were likely to cause substantial

consumer injury. The complaints also allege that the respondents deceived consumers into

providing personal information on fake pop-up software registration notices. The complaints

allege that RTO stores did not limit the activation of Detective Mode to instances of theft, but

rather activated monitoring technology when consumers were late on rental payments and the

stores had no reason to believe the computers had been the subject of criminal theft.


consumer privacy and affirming the ability of these RTO companies to locate stolen property,


other confidential consumer information. The proposed orders ban the respondents from using

monitoring technology in connection with any covered RTO transaction,1

but allow them to use

geophysical location tracking technology to aid in locating and recovering computers. Consumer

renters must receive notice of and give their consent to the installation and use of location

tracking technology at the time the computer is rented, and in most instances computer users

must receive notice immediately prior to its activation. The notice requirement may be

suspended, however, where the consumer reports the computer stolen – or there is otherwise a

reasonable basis to believe that the computer has been stolen – and a police report is filed. These

provisions provide these RTO stores effective means to locate and retrieve the computers.

The proposed orders also bar the use of deceptive tactics (including fake software registration

screens) to collect personal information from consumers and prohibit other misrepresentations

about consumer privacy. Similarly, the orders prohibit the use of information gathered from

consumers using deceptive means to collect on consumer rental contracts.



modifications. The final Decisions and Orders and other relevant materials are available from the

Commission’s website at http://www.ftc.gov. It helps the Commission’s analysis to hear from a

variety of sources in its work. The Commission thanks you again for your comment.


Donald S. Clark

Secretary

1

The proposed orders define “covered rent-to-own transaction” as “any transaction where

a consumer enters into an agreement for the purchase or rental of a computer and the consumer’s






http://www.ftc.gov/





April 11, 2013

Tim Kelly

Commonwealth of Pennsylvania

Re: In the Matter of DesignerWare, LLC,

In the Matter of Timothy Kelly and Ronald P. Koller

File No. 112 3151, Docket Nos. C-4390 and C-4391

Dear Mr. Kelly:





Your comment suggests that the proposed consent orders with DesignerWare, LLC

(“DesignerWare”), and its owners, you and Ronald P. Koller, are based on incorrect

assumptions. In particular, you assert that DesignerWare’s monitoring technology, Detective

Mode, could only be installed on rented computers that were reported as “stolen.” Although you

concede that DesignerWare did not “know about how all its licensees used the Detective Mode

program,” you claim “it would not make sense for them to use the software” to monitor

consumers who were late on their payments.

As you know, the Commission conducted a thorough investigation of this matter, including how

DesignerWare’s licensees used Detective Mode. The complaint against DesignerWare is based

on the Commission’s reason to believe that the company engaged in unfair and deceptive

practices in violation of Section 5 the Federal Trade Commission Act, 15 U.S.C. § 45. The

complaint alleges that DesignerWare did not monitor its collection of or limit its licensees’

access to Detective Mode data, which included sensitive consumer information such as

screenshots of medical records, Social Security numbers, and financial account statements and

webcam photos of individuals engaged in personal activities within the presumed privacy of their

own homes. The complaint further alleges that, in numerous instances, RTO stores that licensed

Detective Mode used the program where consumers were late in making rental payments and the

stores had no reason to believe that the computers had been stolen. As you acknowledge,

DesignerWare did not – and, in fact, could not – ensure that Detective Mode data was used only

to locate stolen computers.


consumer privacy and affirming the ability of the RTO store respondents to locate stolen

property, using methods that do not place consumers at risk from the disclosure of financial,

health, or other confidential consumer information. The proposed orders ban the respondents’

use of monitoring technology – such as keystroke logging, taking screenshots of computer users’

activities, and photographing anyone in view of the computer’s camera – in connection with any

covered RTO transaction.1

However, they permit the limited use of geophysical location

tracking technology, provided that consumer renters receive notice of and give their consent to

its use, and that computer users receive notice immediately prior to its activation. Further, the

proposed orders recognize that geophysical location tracking technology may legitimately help

find a stolen computer and, accordingly, expressly allow it to be activated without notifying a

computer user where (a) the renter reports that the computer has been stolen or there is otherwise

a reasonable basis to believe that the computer has been stolen, and (b) a police report about the

stolen computer has been filed.


best be served by issuing the Decisions and Orders in final form without any modifications. The

final Decisions and Orders and other relevant materials are available from the Commission’s




Donald S. Clark

Secretary

1 The proposed orders define “covered rent-to-own transaction” as “any transaction where a







http://www.ftc.gov/





April 11, 2013

Charles Douglas

State of Idaho

Re: In the Matter of DesignerWare, LLC, File No. 112 3151, Docket No. C-4390

Dear Mr. Douglas:

Thank you for your comment regarding the Federal Trade Commission’s consent agreement in




Your comment objects to the proposed consent order with DesignerWare, LLC, because it will

prohibit the use of monitoring technology on rented computers. According to your comment,

you were notified when you rented a laptop from a rent-to-own (“RTO”) store that monitoring

software was installed on the computer and that it would only be used if you failed to return the

device at the end of the rental contract term.

The Commission appreciates your comment, but concludes that, based on the facts uncovered

during its investigation, the proposed order is necessary to protect consumer privacy and help

deter future violations of law. The complaints against DesignerWare, its owners, and the RTO

stores allege that they licensed, activated, and surreptitiously used software installed on rented

computers to monitor consumers using rented computers, including by capturing keystrokes,

screenshots of computer activities, and pictures taken by computer webcams. These practices,

the complaints charge, caused or were likely to cause substantial consumer injury. In addition,

the DesignerWare complaint alleges that the company and its owners harmed consumers by

installing geophysical location tracking software on rented computers without consent from

computer renters and contemporaneous notice to computer users. According to the complaints,

in numerous instances, consumers were not informed that their computer use or physical location

would be monitored or tracked in this manner.

The Commission believes the proposed order strikes an appropriate balance between protecting

consumer privacy and affirming the ability of DesignerWare’s licensees to locate stolen property,


other confidential consumer information. The proposed order bans DesignerWare from using

monitoring technology in connection with any covered RTO transaction,1

but it allows the

company to provide its licensees the capacity to use geophysical location tracking technology,

provided that consumer renters receive notice of and give their consent to its use, and that

computer users receive notice immediately prior to its activation. The notice requirement may be

suspended, however, where the consumer reports the computer stolen – or there is otherwise a

reasonable basis to believe that the computer has been stolen – and a police report is filed. These

provisions provide DesignerWare’s licensees with an effective means to locate and retrieve the

computers.


best be served by issuing the Decision and Order in final form without any modifications. The

final Decision and Order and other relevant materials are available from the Commission’s




Donald S. Clark

Secretary

1

“Covered rent-to-own transaction” is defined as “any transaction where a consumer enters into

an agreement for the purchase or rental of a computer and the consumer’s contract or rental

agreement provides for payments over time and an option to purchase the computer.” The

prohibition on monitoring does not include consumers’ rental of laptops outside the RTO

context, or any business’s use or rental of laptops, and also does not cover the use of monitoring

technology for non-commercial purposes by private persons (e.g., parents monitoring their

children’s computer use).

http://www.ftc.gov/





April 11, 2013

Martin Emory

State of Florida


Dear Mr. Emory:





Your comment expresses concerns about a software product manufactured by a different

company than DesignerWare, LLC, which you believe can surreptitiously monitor a consumer’s

computer use when installed on that device. You recommend that, instead of issuing the

proposed order, the Commission investigate the manufacturer of this competing software, which

is used by the rent-to-own (“RTO”) store from which you are leasing a computer. You also

question how a software manufacturer may be held liable for unlawful use of its product by a

third party.

The Commission appreciates your comment and your concern about the RTO industry’s use of

monitoring technology on rented computers. The Commission takes seriously these concerns, as

evidenced by the coordinated enforcement actions in this matter against not only DesignerWare

and its principals, Timothy Kelly and Ronald P. Koller, but also against seven RTO companies:

Aspen Way Enterprises, Inc.; B. Stamper Enterprises, Inc.; C.A.L.M. Ventures, Inc.; J.A.G.

Rents, LLC; Red Zone Investment Group, Inc.; Showplace, Inc.; and Watershed Development

Corporation. All of these companies, which collectively operate RTO stores throughout the

country, have agreed to settle charges similar to those brought against DesignerWare and its

principals. We hope these orders have a deterrent effect on other RTO stores as well.

The Commission concludes that, based on the facts uncovered during our investigation, the

proposed order with DesignerWare will strongly protect consumers from the unwarranted

disclosure of financial, health, or other confidential information. As the complaint against

DesignerWare alleges, the company’s role involved more than the development and sale of

software. An RTO store that licensed DesignerWare’s monitoring software, PC Rental Agent,

could activate the program’s “Detective Mode” by accessing DesignerWare’s website, enabling

the program to run on a computer on which it was installed. DesignerWare’s servers collected

the data captured by Detective Mode and then emailed it to the RTO store. Without

DesignerWare providing RTO stores with access to its web portal and providing servers to

support both PC Rental Agent and Detective Mode, the collection and disclosure of consumers’

private information would not have been possible.

DesignerWare played a similarly active role in the use of the geophysical location tracking

technology that it made available to PC Rental Agent licensees in 2011. As alleged in the

Commission’s complaint against DesignerWare, a computer on which PC Rental Agent is

installed reports to DesignerWare’s servers the location of WiFi hotspots the computer

encounters, along with the computer’s IP address. DesignerWare makes this information easily

available to RTO store licensees by cross-referencing a list of publicly available WiFi hotspots

with the street addresses for the particular hotspots viewed or accessed by rented computers.

With respect to your concern about the competing software product used by RTO stores to

surreptitiously monitor consumer activities on rented computers, the settlements with

DesignerWare, its principals, and the RTO companies do not preclude the Commission from

taking future action against other companies whose practices violate Section 5 of the Federal

Trade Commission Act (“FTC Act”) or other laws it enforces. To the extent you would like to

provide further information about specific industry practices that you believe are unlawful, we

encourage you to file a complaint with the Commission’s Consumer Response Center.

Complaints filed with the Commission are part of the Consumer Sentinel database and provide

an important source of information for the Commission and hundreds of other federal and state

law enforcement agencies. You may file a complaint at https://www.ftccomplaintassistant.gov/.


best be served by issuing the Decision and Order against DesignerWare in final form without any

modifications. The final Decision and Order and other relevant materials are available from the




Donald S. Clark

Secretary

https://www.ftccomplaintassistant.gov/

http://www.ftc.gov/





April 11, 2013

Gregory

State of Colorado


Dear Sir or Madam:





Your comment suggests that the proposed orders with DesignerWare, LLC, and its principals

will have a limited impact on the market for monitoring technology that can be used on rented

computers. You claim that other software manufacturers continue to market products similar to

DesignerWare’s program and that “99% of the industry [will] go[] unchanged” as a result of the

Commission’s actions.

The Commission appreciates your comment and your concern about the rent-to-own (“RTO”)

industry’s use of monitoring technology on rented computers. The Commission takes seriously

these concerns, as evidenced by the coordinated enforcement actions in this matter against not

only DesignerWare and its principals, but also against seven RTO companies: Aspen Way


Zone Investment Group, Inc.; Showplace, Inc.; and Watershed Development Corporation. All of

these companies, which collectively operate RTO stores throughout the country, have agreed to

settle charges similar to those brought against DesignerWare and its principals. We hope these

orders have a deterrent effect on other RTO stores as well.

In addition, the settlements with DesignerWare, its principals, and the RTO companies do not

preclude the Commission from taking future action against other companies whose practices

violate Section 5 of the Federal Trade Commission Act (“FTC Act”) or other laws it enforces.

To the extent you would like to provide further information about specific industry practices that

you believe are unlawful, we encourage you to file a complaint with the Commission’s

Consumer Response Center. Complaints filed with the Commission are part of the Consumer

Sentinel database and provide an important source of information for the Commission and

hundreds of other federal and state law enforcement agencies. You may file a complaint at

https://www.ftccomplaintassistant.gov/.

https://www.ftccomplaintassistant.gov/


best be served by issuing the Decision and Order against DesignerWare in final form without any

modifications. The final Decision and Order and other relevant materials are available from the




Donald S. Clark

Secretary





April 11, 2013

Martin

State of Michigan


Dear Sir or Madam:

Thank you for your comment regarding the Federal Trade Commission’ s consent agreement in


pursuant to Rule 4.9(b)(6)(ii) of the Commission’ s Rules of Practice, 16 C.F.R. § 4.9(b)(6)(ii),



prohibit the use of monitoring technology, a product you have found useful in your experience as

a rent-to-own (“ RTO” ) professional to recover rented computers. According to your comment,

monitoring has helped your RTO business reduce charge-offs of unreturned computers. You also

state that your practice has been to notify consumers about the use of this technology, asserting

that consumers were unable to use a rented computer until they agreed to be tracked and

monitored if they failed to return the device.


http://www.ftc.gov/

during its investigation, the proposed order is necessary to protect consumer privacy. The

complaints against DesignerWare, its owners, and the RTO stores allege that respondents

licensed, activated, and surreptitiously used software installed on rented computers to monitor

consumers using rented computers, including by capturing keystrokes, screenshots of computer

activities, and pictures taken by computer webcams. These practices, the complaints charge,

caused or were likely to cause substantial consumer injury. According to the complaints, in

numerous instances, consumers were not informed that their computer use would be monitored in

this manner.

In addition, the DesignerWare complaint alleges that the company and its owners harmed

consumers by installing geophysical location tracking software on rented computers without

consent from computer renters and contemporaneous notice to computer users. The orders

against DesignerWare and the RTO store respondents require that consumer renters receive

notice of and give their consent to the installation and use of location tracking technology at the

time the computer is rented, and in most instances computer users must receive notice

immediately prior to its activation. The notice requirement may be suspended, however, where

the consumer reports the computer stolen or there is otherwise a reasonable basis to believe that

the computer has been stolen and a police report is filed. These provisions provide the RTO

stores effective means to locate and retrieve the computers. Although your comment suggests

that “ geolocation technology” is worthless because, as distinguished from GPS, it can only

identify the general” location of a computer, the proposed orders explicitly contemplate that,

subject to the protections in the proposed orders, the respondents may use GPS or other

technologies that collect and report data or information that identifies the precise geophysical

location of a computer. To the extent that the RTO store respondents have not used such

tracking technology, the proposed orders will ensure that they do not begin tracking rented

computers (using GPS or another method) without appropriate safeguards.




website at http://www.ftc.gov It helps the Commission's analysis to hear from a variety of



Donald S. Clark

Secretary

http://www.ftc.gov/



FEDERAL TRADE COMMISSION Washington, D.C. 20580

April 11, 2013

Westmoreland

Commonwealth of Pennsylvania


Dear Sir or Madam:






prohibit the use of monitoring technology on rented computers. According to your comment, “it

is impossible” for a consumer who leases a computer from a rent-to-own (“RTO”) store to be

unaware that the store may monitor them through the computer’s webcam. You also dispute

more generally allegedly “false and misleading” statements presumably in the Commission’s

complaint against DesignerWare and related materials about this matter on the Commission’s

website.


during its investigation, the proposed order is necessary to protect consumer privacy. The

complaints against DesignerWare, its owners, and the RTO stores allege that respondents

licensed, activated, and surreptitiously used software installed on rented computers to monitor

consumers using rented computers, including by capturing keystrokes, screenshots of computer

activities, and pictures taken by computer webcams. These practices, the complaints charge,

caused or were likely to cause substantial consumer injury. In addition, the DesignerWare

complaint alleges that the company and its owners harmed consumers by installing geophysical

location tracking software on rented computers without consent from computer renters and

contemporaneous notice to computer users. According to the complaints, in numerous instances,

consumers were not informed that their computer use would be monitored in this manner.






http://www.ftc.gov/

By direction of the Commission, Commissioner Wright not participating. Donald S. Clark

Secretary





April 11, 2013

Jon Albert

State of Illinois


Dear Mr. Albert:





Your comment asserts that the proposed consent order with DesignerWare, LLC

(“DesignerWare”) will deprive rent-to-own (“RTO”) stores of their ability to locate and retrieve

stolen computers, a service you have found helpful to your business. You note that it has been

your practice to inform your employees about the presence of monitoring software on laptop

computers that you lease from an RTO store for your employees. Your comment does not

address the potential risks of exposing confidential information about your business and

customers to third-party RTO store employees using monitoring software installed on rented

laptops.

The Commission’s complaint against DesignerWare and its owners alleges that Detective Mode

was activated on rented computers for purposes other than locating stolen computers. According

to the complaint, DesignerWare did not limit Detective Mode use to instances of theft and, in

many instances, RTO stores used the software where consumers were late on making rental

payments but where the stores had no reason to believe that the computers had been stolen. The

complaint also alleges that DesignerWare did not require or ensure that consumers who rented

computers from RTO stores that activated geophysical location tracking software received notice

that the software was installed on those devices and, in many instances, RTO stores did not

disclose that fact to consumer renters. As the Commission’s complaint alleges, secretly

collecting such data can cause consumers substantial injury, including the unwanted capture of

private details about individuals and families at home.

The Commission believes the proposed settlement with DesignerWare strikes an appropriate

balance between protecting consumer privacy and affirming the ability of the RTO store

respondents to locate stolen property, using methods that do not place consumers at risk from the

disclosure of financial, health, or other confidential consumer information. The proposed order

bans DesignerWare from using monitoring technology – such as keystroke logging, taking

screenshots of computer users’ activities, and photographing anyone in view of the computer’s

camera – in connection with any covered RTO transaction.1

At the same time, the order allows

the company to use geophysical location tracking technology, provided that consumer renters

receive notice of and give their consent to its use, and that computer users receive notice

immediately prior to its activation. This notice requirement may be suspended where the

consumer reports the computer stolen – or there is otherwise a reasonable basis to believe that the

computer has been stolen – and a police report is filed. This provision provides DesignerWare’s

licensees with an effective means to locate and retrieve stolen computers.







Donald S. Clark

Secretary

1 “Covered rent-to-own transaction” is defined as “any transaction where a consumer enters into

an agreement for the purchase or rental of a computer and the consumer’s contract or rental

agreement provides for payments over time and an option to purchase the computer.” The

prohibition on monitoring does not include consumers’ rental of laptops outside the RTO context,

or any business’s use or rental of laptops, and also does not cover the use of monitoring

technology for non-commercial purposes by private persons (e.g., parents monitoring their

children’s computer use).

http://www.ftc.gov/





April 11, 2013

Marc Rotenberg, Executive Director

David Jacobs, Consumer Protection Counsel

Julia Horowitz, Fellow

Electronic Privacy Information Center

Washington, DC 20009





Dear Mr. Rotenberg, Mr. Jacobs, and Ms. Horowitz:

Thank you for your comment, on behalf of the Electronic Privacy Information Center (“EPIC”),

regarding the Federal Trade Commission’s consent agreements in the above-entitled proceeding.

The Commission has placed your comment on the public record pursuant to Rule 4.9(b)(6)(ii) of

the Commission’s Rules of Practice, 16 C.F.R. § 4.9(b)(6)(ii), and has given it serious

consideration.

The Commission appreciates your interest in this matter and support of the proposed consent

agreements with DesignerWare, LLC, and other above-referenced respondents (collectively “the

Companies”). The Commission is committed to protecting consumer privacy and believes the

proposed orders will substantially protect consumers and promote effective deterrence regarding

the use of monitoring and/or tracking technology by rent-to-own companies (“RTO stores”).

The proposed orders with DesignerWare and its owners ban them from using or providing third

parties with technology that allows RTO stores to monitor consumer use of rented computers.

The proposed RTO store orders similarly ban the stores from using such technology in

connection with covered RTO transactions. The proposed orders also prohibit the Companies

from using geographical tracking technology to gather information from any rented computer

without providing clear and prominent notice to and obtaining affirmative express consent from

the computer’s renter at the time the computer is rented. Computer users must also receive clear

and prominent notice immediately prior to each activation of tracking technology.

Your comment makes three recommendations, two regarding the terms of the proposed orders

and one broader proposal about additional Commission action to protect the privacy interests of

low-income consumers. With respect to your recommendations concerning the proposed orders,

EPIC suggests that the Companies be required to implement Fair Information Practices (“FIPs”)

similar to those set forth in the White House’s Consumer Privacy Bill of Rights (“CPBR”). You

also recommend that the final orders make publicly available the Companies’ compliance

reports.

EPIC acknowledges that the terms of the proposed orders do much to inhibit future instances of

the “commercial surveillance” practices in which the Companies engaged.

However, you recommend that the orders will better protect consumer privacy if they require the

Companies to implement FIPs, including Respect for Context; Security; Access and Accuracy;

and Accountability. The proposed orders already contain provisions that will prohibit the

gathering of consumer data using the monitoring practices challenged in the Commission’s

complaints, limit the use of geophysical location tracking technology, and require the destruction

of illegally collected information. The orders effectively curtail the unlawful conduct alleged in

the Commission’s complaints and broadly prohibit misrepresentations about privacy to

consumers in connection with covered RTO transactions. We believe that these protections will

adequately deter the Companies from engaging in the alleged unlawful conduct. As the

Commission has noted previously, the orders are designed to address specific conduct alleged in

the complaints and not to impose obligations that may not be tied to such conduct.1

You also ask the Commission to make public the compliance reports required by the orders to

the greatest extent possible. As the Commission has noted previously, it recognizes the public

interest in transparency regarding a company’s compliance with an FTC order.2

The public may

seek access to the compliance reports required by these orders by making a request under the

Freedom of Information Act.3

However, the compliance reports may contain trade secrets or

other confidential commercial or financial information, or information about consumers or other

third parties, that the Commission may not publicly disclose.4

Upon receipt of a request for

confidential treatment of all or part of any compliance reports, the Commission will conduct a

careful review to determine whether confidential treatment is warranted, and make every effort

to be transparent, consistent with applicable law. If the Commission determines that the reports

have been frequently requested or are likely to be frequently requested because of their subject

matter, the agency will post such portions as may be released to the public on the FTC’s website.

Finally, you note that “[RTO] companies are debt traps for low-income and disadvantaged

consumers,” and request that the Commission further investigate the connection between privacy

and poverty. We are cognizant of the consumer protection issues associated with RTO

transactions, and the Commission’s complaints against DesignerWare and the RTO stores

acknowledge and address the connection between their allegedly privacy-invasive conduct and

their collection practices.5

You specifically recommend that the Commission convene a

workshop to explore how industry privacy practices may disproportionately affect low-income

consumers. The Commission appreciates your attention to these issues. Protecting economically

disadvantaged consumers and fighting the “last-dollar frauds” that target them are important

priorities for the Commission, as evidenced by our enforcement actions in numerous areas,

including privacy,6

debt collection,7

loan modifications,8

and business opportunities.9

We will

continue to vigorously protect our nation’s most vulnerable consumers. Considerations

regarding the privacy implications of business practices that affect these populations are an

important component of our efforts.


best be served by issuing the Decisions and Orders in final form without modifications.

The final Decisions and Orders and other relevant materials are available from the Commission’s




Donald S. Clark

Secretary

1

Letter from Donald S. Clark, Secretary, Fed. Trade Comm’n, to Marc Rotenberg et. al (Aug.

30, 2012), available at http://ftc.gov/os/caselist/1023058/120911myspaceletterepic.pdf.

2 Id.

3 5 U.S.C. § 552 et seq (“FOIA”). As you note, the Commission has approved FOIA requests

for reports submitted pursuant to consent agreements entered in other matters. See, e.g., Letter

from Sarah Mathias, Associate General Counsel, Fed. Trade Comm’n, to Ginger McCall,

Director, EPIC Open Gov’t Program (Feb. 15, 2012), available at

https://epic.org/privacy/ftc/google/EPIC-FTC-Google-Compliance-Reply-02-17-12.pdf.

4 See 15 U.S.C. § 46(f) (“the Commission shall not have any authority to make public any trade

secret or any commercial or financial information which is obtained from any person and which

is privileged or confidential”); Commission Rule of Practice § 4.10.

5 The RTO store complaints allege that their use of information improperly gathered from

consumers to collect on rental contracts was unfair, while the DesignerWare complaint alleges

that the company and its principals provided their licensees with the means to engage in this

unfair conduct.

6 See, e.g, United States v. PLS Fin. Serv., Case No. 1:12-cv-08334 (N.D. Ill. settlement filed

Oct. 26, 2012) (data security and disposal practices of a consumer finance company whose

services included payday loans, check cashing, automobile title loans, and phone cards); Equifax

Information Servs. LLC, FTC Docket No. C-4387 (Mar. 5, 2013) (final consent order) (improper

sale of prescreened lists of homeowners delinquent on mortgage payments that marketers then

used to pitch debt relief and loan modification programs to these financially distressed

consumers); United States v. Direct Lending Source, Inc., Case No. 12-CV-2441-DMS-BLM

(S.D. Cal. settlement filed Oct. 11, 2012) (same).

7 See, e.g., FTC v. Forensic Case Mgmt. Servs., Inc., Case No. CV-11-7484 (C.D. Cal.

settlement filed Jan. 4, 2013) (illegal debt collection practices, including the improper disclosure

http://www.ftc.gov/

http://ftc.gov/os/caselist/1023058/120911myspaceletterepic.pdf

https://epic.org/privacy/ftc/google/EPIC-FTC-Google-Compliance-Reply-02-17-12.pdf

of consumers’ debts to their employers, neighbors, and other third parties); FTC v. Asset

Acceptance LLC, Case No. 9:12-CV-182-T-27EAJ (M.D. Fla. consent decree filed Jan. 12, 2012)

(collection of time-barred debts and other debt collection practices).

8 See, e.g., FTC v. Consumer Advocates Group Experts, LLC, Case No. CV12-04736 DDP (C.D.

Cal. settlement filed Feb. 7, 2013) (bogus mortgage modification and forensic audit services

marketed to vulnerable homeowners); FTC v. Freedom Cos. Mktg., Case No. 12cv5743 (N.D. Ill.

filed July 23, 2012) (nationwide mortgage assistance relief scam targeting Spanish-speaking

homeowners).

9 For example, the FTC recently announced seven cases against deceptive business opportunity

schemes as part of a coordinated group of more than seventy actions brought by federal and state

law enforcement agencies. See http://www.ftc.gov/opa/2012/11/lostopp.shtm.

http://www.ftc.gov/opa/2012/11/lostopp.shtm

Documents

Office of the Secretary FEDERAL TRADE …...Office of the Secretary United States of America FEDERAL TRADE COMMISSION Washington, D.C. 20580 April 11, 2013 Commenters Expressing General