The check authorization companies that consumers love to complain about may be doing some complaining of their own these days. TeleCheck has agreed to pay $3.5 million to settle Federal Trade Commission charges that it violated the Fair Credit Reporting Act (FCRA).
That's the same amount its primary competitor, Certegy Check Services, agreed to pay last August. Both companies have also agreed to clean up their consumer protection practices.
TeleCheck, based in Houston, is a consumer reporting agency (CRA) that compiles consumers’ personal information and uses it to help retail merchants throughout the United States determine whether to accept consumers’ checks.
Under the FCRA, consumers whose checks are denied based on information TeleCheck provided to the merchant have the right to dispute that information and have TeleCheck investigate and correct any inaccuracies.
But as recent ConsumerAffairs stories have shown, many consumers say they are not advised of their right to dispute the information and say they are simply told there is nothing they can do about it.
“We were denied a check at Walgreens (where we have an account) due to TeleCheck's profile. We went to the bank and they called TeleCheck to tell them we had plenty of money in our account," said an Illinois consumer named Larry in a posting to ConsumerAffairs last month. "TeleCheck said it didn't matter how much money we had in the bank, their statistical profile found something else. ... The fact that the bank said there was money in the bank meant nothing to them. They said we shouldn't write checks for seven days (it's Christmas season!).”
The FTC’s complaint alleges, among other things, that TeleCheck did not follow proper dispute procedures, including refusing to investigate disputes. The complaint also alleges that TeleCheck failed to follow reasonable procedures to assure the maximum possible accuracy of the information it provided to its merchant clients as required by the FCRA, and failed to promptly correct errors on consumers’ reports.
In addition, the complaint alleges that an affiliated debt-collection entity, TRS Recovery Services, Inc., which handles consumer debt taken on by TeleCheck and furnishes information about consumers to TeleCheck, violated the requirements of the FTC’s Furnisher Rule, which requires entities furnishing information to CRAs to ensure the accuracy and integrity of the information provided.
Crackdown on data brokers
“If CRAs like TeleCheck provide merchants with inaccurate information, those merchants may wrongly deny consumers the ability to buy even the most essential items, like food and medicine. The FCRA gives consumers the right to dispute and correct inaccurate information,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “The Commission takes violations of these rights seriously.”
The order settling the FTC’s charges requires TeleCheck and TRS to alter their business practices to comply with the requirements of the FCRA and the Furnisher Rule in the future.
The case is part of a broader FTC initiative to target the practices of data brokers, which often compile, maintain, and sell sensitive consumer information. Consumer reporting agencies like TeleCheck are data brokers that sell information to companies making important decisions about consumers, such as their ability to get credit or pay for goods and services by check.