Equifax -- one of the largest consumer credit reporting agencies -- improperly sold the names of consumers who were late on their mortgage payments, opening the financially-distressed homeowners to pitches for loan modification and debt relief schemes, the Federal Trade Commission (FTC) said today.
Equifax and the companies that allegedly bought and resold the information will pay a total of nearly $1.6 million to resolve charges that they violated the FTC Act and the Fair Credit Reporting Act (FCRA).
According to the FTC, Equifax sold more than 17,000 prescreened lists of consumers to companies including Direct Lending Source, Inc., which subsequently resold some lists to third parties, who used their data to pitch loan modification and debt relief services to people in financial distress.
Equifax will pay $393,000 to resolve allegations that its inadequate procedures led to the sale of lists of consumer information to firms that should not have received them.
As part of a separate settlement, Direct Lending Source will pay a $1.2 million civil penalty,and will be barred from using or selling prescreened lists without a permissible purpose, or in connection with solicitations for debt relief or mortgage assistance relief products or services.
The FTC alleged that between January 2008 and early 2010, Equifax sold Direct Lending and its affiliates lists of people who met selected criteria – known as prescreened lists. According to the agency’s complaint, the lists contained information about millions of consumers, including sensitive information such as credit scores and whether they were 30, 60, or 90 days late on their mortgage payments.
According to the FTC, neither Direct Lending nor its affiliates, Bailey & Associates Advertising, Inc. and Virtual Lending Source, LLC, had a legally permissible purpose to obtain the prescreened lists.
Under the FCRA, the only permissible purpose for obtaining a prescreened list is to make “firm offers of credit or insurance” – which are offers that will be honored if consumers meet pre-selected criteria. Using a prescreened list for general marketing purposes is not allowed.
The FTC charged that Direct Lending sold the information to third parties that then used it to market products to consumers in financial distress, including companies that have been the subject of law enforcement investigations.
Equifax also failed to properly investigate when it learned Direct Lending was violating Equifax’s internal policies on prescreening, the agency charged.
The FTC also alleged that Equifax knew or should have known that in many cases Direct Lending resold the lists without telling Equifax who would end up using the information. Despite these failures, the FTC alleged Equifax continued selling prescreened lists to Direct Lending. The FTC alleged that Equifax’s failure to employ appropriate measures to control access to sensitive consumer information was unfair, in violation of Section 5 of the FTC Act.