Imagine getting set up with a rent-to-own computer only to later find out that the retailer was surreptitiously snapping Webcam photos of you and recording your keystrokes via spyware. As bad as this sounds, it reportedly happened.

Atlanta-based Aaron's rent-to-own computer chain has been accused of knowingly installing software onto its computers that secretly monitored its customers. The Federal Trade Commission caught onto the Aaron's alleged tactics and filed a complaint against the company earlier this year. On Tuesday, the chain agreed to settle with the FTC.

According to the FTC's complaint (PDF), Aaron's software tracked customers' locations, took photos with the computers' Webcams "including those of adults engaged in intimate activities," and activated keyloggers that were able to capture login credentials for everything from e-mail to Facebook to banking sites.

"Consumers have a right to rent computers free of cyberspying and to know when and how they are being tracked by a company," FTC's Bureau of Consumer Protection Director Jessica Rich said in a statement. "By enabling their franchisees to use this invasive software, Aaron's facilitated a violation of many consumers' privacy."

Under the terms of the settlement, Aaron's is prohibited from using monitoring technology that captures keystrokes, takes photos, or records sound. The company must also get customer consent before it uses location-tracking software on its rental computers.

Aaron's came under fire from the FTC in a separate complaint last year that was specifically about software the company had allegedly used. The chain was one of eight companies accused of using a program called "Detective Mode," which secretly monitored customers and also showed users fake "software registration" screens designed to gather personal information. In this instance, Aaron's also settled with the FTC.

Before the FTC filed its complaints against Aaron's, consumers filed their own lawsuit against the company in a case called Byrd v. Aaron's. These consumers are pleased with the results of Aaron's new settlement with the FTC.

"The FTC settlement is promising news for consumers," Maury Herman, lawyer for the consumers in Byrd v. Aaron's, told CNET. "The government's work confirms the troubling findings of our civil litigation. Too few consumers are aware of this type of spyware. We advocate further investigation, better consumer awareness, and privacy reforms."

The current FTC settlement now has a 30-day public comment period before the government agency decides whether or not to approve it.

Updated October 23 at 10:25 a.m. PT with comment from Maury Herman, lawyer for consumers in Byrd v. Aaron's.