The lawsuit in the US state of Illinois claimed that Facebook's 'Tag Suggestions' tool, which scans a user's face in photos and offers suggestions about who that person might be, stored biometric data without user consent, violating the Illinois Biometric Information Privacy Act, CNET reported on Thursday.
A federal judge ruled in favour of making the facial recognition case a class action lawsuit in 2018. Facebook appealed against the ruling but lost the appeal in a 3-0 court decision in August last year.
Facebook's $550 million settlement will be paid out to eligible Illinois users and to cover the plaintiffs' legal fees, according to The New York Times.
The $550 million amount negotiated is "the largest all-cash privacy class action settlement to date," according to law firm Edelson PC, one of three that represented the plaintiffs in the suit.
"Biometrics is one of the two primary battlegrounds, along with geolocation, that will define our privacy rights for the next generation," Edelson PC founder and CEO Jay Edelson said in a press release.
Illinois Facebook users from mid-2011 to mid-2015 may expect as much as $200 each, depending on several factors.
This is the second major settlement from Facebook in six months, after a huge $5 billion settlement with the US FTC last year over users' privacy violations.
"We are proud of the strong team we had in place that had the resolve to fight this critically important case over the last five years. We hope and expect that other companies will follow Facebook's lead and pay significant attention to the importance of our biometric information," said Edelson.
( With inputs from IANS )