Equifax improperly sold the credit information on millions of struggling homeowners to marketers selling debt relief products and mortgage modification services, the Federal Trade Commission announced.
Equifax sold lists of homeowners who were late on their mortgage payments. For its part in improperly disseminating the information of millions of consumers, Equifax will pay $393,000, which forfeits any gains made from selling the information. A second firm, Direct Lending Source, will pay a $1.2 million civil penalty.
Not very fair
Under the Fair Credit Reporting Act, companies with legitimate and permissible reasons for obtaining credit information can buy it from credit bureaus. For instance, credit card companies can buy pre-screened lists of consumers who might want pre-approved credit cards.
It would be illegal for companies selling debt relief products or mortgage assistance products to buy consumer information from credit bureaus if they charge advance fees for those services. It would be illegal for the credit reporting bureaus to sell information to those companies as well.
Without admitting wrongdoing, Equifax has agreed to settle charges that it improperly sold pre-screened lists, the FTC says. Equifax is one of the three national credit bureaus, in addition to Experian and TransUnion.
In the press release, the FTC reported that Equifax sold 17,000 lists of delinquent homeowners to Direct Lending Source, which then turned around and sold the lists to other third parties who then tried to peddle loan modifications and debt relief services.
From the press release:
The FTC alleged that, in addition to providing the lists to entities without a permissible purpose and having inadequate procedures to prevent this from happening, Equifax failed to properly investigate when it learned Direct Lending was violating Equifax's internal policies on prescreening. 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 settlement prohibits Equifax from:
- Furnishing pre-screened lists to anyone it does not have reason to believe has a permissible purpose to receive them.
- Failing to maintain reasonable procedures to limit the furnishing of pre-screened lists to anyone except those who have a permissible purpose to receive them.
- Selling pre-screened lists in connection with offers of debt relief products or services and mortgage assistance relief products and services, when advance fees are charged, with limited exceptions.
According to the FTC, Direct Lending Source is primarily responsible for obtaining the credit reports under false pretenses. "Under the (Fair Credit Reporting Act), the only permissible purpose for obtaining a pre-screened list is to make 'firm offers of credit or insurance,' which are offers that will be honored if consumers meet preselected criteria. Using a pre-screened list for general marketing purposes is not allowed," the FTC says.
Nonetheless, a fine of $393,000 for Equifax seems like a slap on the wrist. This went on for two years, and Equifax failed to investigate when they found out the company was violating their policies.
What do you think?
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