Groupon Inc disclosed some details of its plan to offer location-based offers through mobile phones when the largest daily deal company responded on Thursday to Congressional questions about its privacy policies.

Groupon general counsel David Schellhase said the company is developing technology that will track customers' location, even if they don't have a Groupon app open on their phones, according to an August 10 letter to the co-chairmen of the House Bi-Partisan Privacy Caucus: Joe Barton, a Texas Republican, and Edward Markey, a Massachusetts Democrat.

Groupon currently does not access location data when the Groupon mobile application is not running. However, our customers are asking for services that require this functionality, Schellhase wrote in the letter, a copy of which was released on Thursday by Barton and Markey.

The congressmen wrote to Groupon Chief Executive Andrew Mason in July asking about the company's new privacy and data collection policy.

Groupon, which filed recently for a $750 million initial public offering, collects data on customers so it can offer more appropriate bargains, increasing the chances subscribers will buy them.

Groupon and rivals including LivingSocial are offering more instant deals that require location information. This is a potentially lucrative new part of the daily deal sector, but it has increased concern about privacy.

A customer may wish to have a 'push' notification appear in her email around the noon hour to alert her that a lunch special is being offered at a nearby restaurant, Schellhase wrote in his August 10 letter.

In order to choose a relevant deal for the user at the correct time, location information would need to be collected about the user just before noon, even if the Groupon mobile application is not running on the device at that time, he explained. We are working to provide this type of functionality in the future.

Schellhase stressed that customers must explicitly consent to give their location information to Groupon, otherwise the company won't collect the data.

Markey expressed satisfaction with Groupon's approach.

It's appropriate that Groupon currently uses an opt-in feature for location-based services, he said in a statement on Thursday. This enables consumers to decide whether to grant permission for Groupon to pinpoint where a consumer is at any given moment so it can make offers tailored to that location.

(Reporting by Alistair Barr; Editing by Gary Hill)