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FTC reaches $20 million settlement with company for misusing consumer credit reports
On April 29, the FTC announced a civil complaint and stipulated order filed by the DOJ on its behalf against a home security and monitoring company accused of allegedly violating the FCRA by improperly obtaining consumers’ credit reports to help potential customers qualify for financing for its products and services. According to the complaint, company employees allegedly engaged in a process known as “white paging,” in which the credit history of another individual with the same or similar name as the potential customer is used to qualify the potential customer for the company’s financing program. Additionally, the FTC claimed that company sales representatives allegedly added “impermissible co-signers” to accounts for unqualified customers by unlawfully using the credit history of the “co-signers” without their permission. In the event a customer defaulted on a loan, the company referred the impermissible co-signer to its debt buyer, potentially harming the co-signer’s credit score and subjecting the individual to debt collections, the FTC stated. According to the complaint, the company was aware of the misconduct, terminated hundreds of sales representatives as a result of these practices, but later rehired some of the same sales representatives because they generated millions of dollars in revenue.
Under the terms of the stipulated order—the largest to date for an FTC FCRA action—the company is required to pay a $15 million civil money penalty, as well as $5 million to compensate harmed individuals. Additionally, the company must (i) implement an employee monitoring and training program to prevent further FCRA violations; (ii) establish and maintain an identity theft prevention program; (iii) establish a customer service task force to verify all accounts that reference more than one address or include a co-signer before referring the accounts to a debt collector and assist individuals who were improperly referred to debt collectors; and (iv) obtain biennial assessments by an independent third party to ensure compliance.
While the Commission voted 4-0 to approve the stipulated final order, Commissioner Rohit Chopra issued a separate statement noting that he believes the FTC “should have also alleged that the company violated the FTC Act’s prohibitions on deceptive practices by falsifying credit applications,” and that because the company “turned a blind eye to obvious compliance failures by its sales force” it also allegedly “violated the FTC Act’s prohibition on unfair practices.”