Ed-Tech Bankruptcy Sale and Student Data

FTC Aims to Protect Student Information After Bankruptcy
ConnectEDU is an ed-tech company that recently filed for bankruptcy.  With the looming sale of the company’s approximately 20 million student records, the Federal Trade Commission (FTC) has indicated that it will “step in to protect the student data,” according to a recent article in Education Week.  How can bankruptcy put student data at risk?
The company, ConnectEDU, has been around for a little over a decade.  According to the article, it “provides interactive tools to help K-12 and post-secondary learners make academic and career decisions.”  ConnectEDU’s privacy policy made a promise to its users that, prior to the company’s sale for any reason, all “registered users would be notified and have the ability to delete their personally identifiable data.”  In other words, a sale of the company could result in the buyer gaining access to personal information from registered users of ConnectEDU.  So why does the FTC need to step in?
According to the FTC, ConnectEDU’s promise to inform registered users about the company’s sale has been compromised by the bankruptcy filing.  With the possible sale of all of ConnectEDU’s assets, which include personal student data, registered users might not learn about the sale and have sufficient time to delete their information prior to the company’s acquisition by a venture capital fund.  After learning about the potential problem, the FTC “authorized its consumer protection bureau to write a letter to the bankruptcy court that will rule on the asset sale.”
Legal Notice Requirements and Bankruptcy
When the FTC sent a letter to the bankruptcy court, it emphasized that the specific terms of the sale of ConnectEDU’s assets to the venture capital fund “do not provide customers the notice and choice set forth in the privacy policy.”  Indeed, the sale terms could actually violate requirements of the FTC Act and the U.S. Bankruptcy Code.
Jessica Rich, the director of the FTC Bureau of Consumer Protection, indicated that students on ConnectEDU’s website “have built personal listings of their academic and personal interests, honors and awards, and work experience.”  In addition, they’ve used resume builders, test prep, and financial literacy tools designed to help them with decisions about their academic and professional careers.  What should ConnectEDU do?  Rich emphasized that ConnectEDU should give its registered users proper notice of the sale, which includes all of their personal information that they’ve uploaded unto the website.  This kind of notice would provide users with the opportunity to remove it prior to the sale.  Or, ConnectEDU could have the personal information destroyed.  Either way, the FTC simply is concerned about the company’s decision to file for bankruptcy leading to the unlawful sale of personal information.
The company received a grant from the Bill & Melinda Gates Foundation for approximately $500,000 last summer.  However, ConnectEDU filed for a Chapter 11 bankruptcy in April of 2014.  In its bankruptcy petition, it listed “between $10 million and $50 million in liabilities against less than $10 million in assets.”
If you have questions about how bankruptcy can affect your personal information as a consumer, it’s important to speak with an experienced Oak Park bankruptcy lawyer.  Contact the Emerson Law Firm today to learn more about your options.
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