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Consumer Financial Services Alert
FTC Settles with Consumer Reporting Agency for Violations of FCRA

The FTC reached a settlement with a nationwide specialty consumer reporting agency for violations of the Fair Credit Reporting Act and Section 5 of the FTC Act. FCRA imposes special obligations for nationwide specialty consumer reporting agencies, which are generally consumer reporting agencies that compile and maintain files on consumers on a nationwide basis relating to, among other things, check writing history. Under FCRA, nationwide specialty consumer reporting agencies are required to, among other things, provide consumers with free file disclosures.

The complaint alleged that the consumer reporting agency, in violation of FCRA, did not follow proper dispute procedures, mainly failures in the reinvestigation process, and failed to follow reasonable procedures to assure maximum possible accuracy of the consumer report information it was providing. The FTC also alleged that the consumer reporting agency violated parts of FCRA’s furnisher rule, which, among other things, requires consumer reporting agencies to provide free annual file disclosures and to have a streamlined process to obtain such disclosures. The FTC maintained that the consumer reporting agency failed to create a streamlined process for consumers and failed to establish reasonable written policies and procedures regarding the accuracy and integrity of the information it furnished. In particular, the FTC alleged that consumers had difficulty in obtaining their annual file disclosures from the consumer reporting agency because the consumer reporting agency required consumers to submit more information than was reasonably necessary to properly identify the consumers before it would provide the annual file disclosures. The terms of the settlement require the consumer reporting agency to pay civil money penalties, improve its dispute procedures and comply with the furnisher rule by maintaining a streamlined process for consumers to request their free annual reports.

The FTC’s settlement comes after the CFPB issued a warning to consumer reporting agencies. In December 2012, the CFPB previously released a guidance bulletin setting forth its expectations for nationwide specialty consumer reporting agencies and after an investigation, issued warning letters detailing consumer reporting agencies’ failure to comply with FCRA and Regulation V, the implementing regulation for FCRA (see December 11, 2012 Alert).

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