Equifax Information Services, LLC—one of the three major U.S. credit reporting agencies—reached a resolution yesterday with the Federal Trade Commission concerning charges the credit bureau had unlawfully sold lists of consumers who had missed mortgage payments. Equifax, as well as the company that purchased the millions of names, will pay about $1.6 million to settle allegations they violated both the Fair Credit Reporting Act and the FTC Act.
In the first settlement, Equifax will pay $393,000 to settle charges that between January 2008 and early 2010 it sold more than 17,000 prescreened lists of consumers to Direct Lending Source, Inc., for purposes other than those allowed under the FCRA. According to the FCRA, such sales are only permissible if they are used to make “firm offers of credit or insurance.”
But in the cases cited, Equifax sold Direct Lending names of consumers who were past due on mortgage payments, which were then resold to third party companies that used the information for general marketing purposes, often contacting the financially-distressed consumers to market debt management products. Many of the companies have been investigated for fraud by law enforcement.
An Equifax spokesman told Reuters the credit bureau ended its affiliation with Direct Lending last year.
“We reached an agreement with the FTC regarding issues they brought to our attention regarding Direct Lending, which was a former customer of Equifax,” Klein said. “As part of this settlement we did not and do not admit to any wrongdoing.”
In addition to paying $393,000, Equifax will be prohibited from supplying prescreened lists to any firm or individual that does not have a lawful purpose to receive them. The credit bureau will also be required to maintain reasonable procedures to prevent prescreened lists from reaching anyone who does not have a legitimate reason to receive them, and prohibited from selling such lists to any organization marketing debt relief products or mortgage assistance services if fees are charged in advance.
A second settlement, between the FTC and Direct Lending, was also announced, in which the defendant was ordered to pay a $1.2 million penalty. Furthermore, Direct Lending and its affiliates will hereby be prohibited from obtaining consumer reports without a lawful purpose or selling such reports to debt relief or mortgage assistance agencies that charge fees in advance. Direct Lending will also be required to disclose to any credit bureau from which it purchases a report the identity of any third party to which it sells the report, as well as the third party or affiliate’s purpose in purchasing the report.
The two settlements are tied to the FTC’s battle to not only safeguard consumer privacy, but protect consumers who are experiencing financial distress. Since 2008, the agency has filed more than 40 cases against firms that offer mortgage relief services but do not deliver. The schemes have cost consumers hundreds of millions of dollars. Fortunately, FTC actions have assisted tens of thousands of victims of such scams, and prevented just as many from becoming future victims.
