Is Your Online Marketplace Ready for the INFORM Consumers Act?

The INFORM Consumers Act took effect on June 27, 2023, and if you’re an online marketplace or online retailer, you’re probably scrambling to wrap your head around what this means for your business. Not to worry, we’re here to help.

The INFORM Consumers Act is a piece of U.S. legislation aimed at enhancing transparency and accountability across online retail marketplaces – with a goal to prevent retail fraud and to keep consumers safe from dishonest sellers.

Let’s break down the most critical pieces that are pertinent to online marketplaces:

Does the INFORM Consumers Act apply to your business?

According to the FTC, “online marketplaces” are defined as a person or business that operates a consumer-directed platform that allows third-party sellers to engage in the sale, purchase, payment, storage, shipping, or delivery of a consumer product in the United States. Does your business fall into this category? 

Additionally, the Act will require online marketplaces to collect and verify certain financial and identifying information from “high-volume third party sellers”. This particular group of sellers is defined as any seller with sales in a continuous 12-month period during the past 24 months who have 200 or more separate sales or transactions of new or unused consumer products on the platform, and $5,000 or more in gross revenues. Do you have sellers that fit into this category?

If your business meets the criteria for the INFORM Act, please keep reading.

While new legislation, the implications for violating the terms of the act are pretty serious, and can cost your business real money. The FTC and states will share enforcement authority of the INFORM Act, and marketplaces found to have violated the law could face civil penalties of $50,120 per violation. The FTC shares that additionally, state attorneys general and other state officials can also file actions in federal court that could result in higher penalties from damages, restitution or other compensation.

So what actions is your business required to take?

Critical components of the INFORM Act include verifying the following information about these types of sellers: 

  • Seller’s government ID
  • Seller’s Tax ID
  • Seller’s bank account information
  • Seller’s contact information 

Furthermore, an online marketplace must disclose to consumers certain information about these high-volume third-party sellers, including: 

  • Seller’s name
  • Seller’s business/mailing address
  • Seller’s phone number

How Tessera Data can help online marketplaces reach compliance

We’re partnering with online marketplaces to prepare for the INFORM Consumers Act with their compliance standards as a top priority. By incorporating Tessera Data’s ID verification product (ID Match) and our national criminal database searches in your process you’ll not only satisfy the need to verify seller names and government IDs with limited Personal Identifiable Information (PII), but also provide safeguards for risk mitigation. You can prevent buyers from venturing into a potentially harmful buying situation and avoid penalties and sanctions associated with the Act.

ID verification is a must-have requirement for compliance with the INFORM Consumers Act to ensure the users selling products on your platform are who they really say they are.

So how does Tessera’s IDV offering work?

We’re powering a stronger ID verification chain that typically stops at biometrics matching (selfie photo upload to an ID document upload) by additionally verifying government IDs (like drivers licenses) to credible data sources via our partnership with (American Association of Vehicle Administrators). Verification costs are low and delivered in near-instant turn-around times (TAT). 

If you’re finding that the information submitted by your seller just isn’t matching up, we offer the ability to work with limited PII (i.e. name and date of birth) to complete an address history trace, another important step towards identity verification. We can additionally offer reverse phone-look up services.

And from there, once you have the user’s identity verified, you can take your investigation one step further by leveraging our massive national criminal database (covering 98% of the US population) to further inquire into a user’s criminal history that might deter you from wanting them to participate in your platform. Uncovering past criminal records related to fraud, misrepresentation, retail theft or other related crimes can serve as tool for evaluating the potential risk of a seller before they begin to list products and services for sale to the public (or to remove those already on your platform who have frequently received negative reviews, returns or complaints as a trigger or signal for deeper investigation). 

Trust and safety are crucial for the success of any online retailer or marketplace. The INFORM Consumers Act is designed with protecting consumers and maintaining their trust in your platform in mind. Your first step is to ensure sellers are representing themselves correctly as a signal for continued ethical behavior on your platform. And Tessera’s ID Match can help. 

How to take action and prepare for the INFORM Consumers Act

Online marketplace providers can partner with Tessera Data to tackle the compliance requirements of the INFORM Consumers Act. By leveraging our industry-leading IDV offerings and further validation through our national criminal records database, retailers can create a safer online environment where consumers can make purchases with confidence, reducing instances of counterfeit or potentially harmful products.

We’re here to help make your transition to compliance under the new INFORM Consumers Act seamless and stress-free. Get in touch with our Sales team to learn more about our leading ID and driver’s license verification products as well as our national criminal database APIs.

Related resources

featured image for PBSA Mid-Year 2024 blog

Proposed Rulemaking from the CFPB: PBSA Mid-Year 2024 Cheat Sheet

Get insight into the Consumer Financial Protection Bureau's 2024 advisory opinions and Notice of Proposed Rulemaking.
ID verification blog hero image

How to Prevent Fraud with Identity Verification Solutions

As identity fraud continues to grow in volume and sophistication, companies should always try to stay one step ahead in the ID verification tactics they use to tackle this issue.

Webinar Recording & Recap | Trust & Safety by Design

Catch the recording from our virtual event, "Safety by Design." Learn how to optimize Trust & Safety practices throughout your user journey.