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This morning, the U.S. Federal Trade Commission (FTC) announced that Equifax Information Services LLC., the credit reporting agency, and some of its customers, had agreed to pay $1.6 million to settle allegations about the improper sales of customer lists between January 2008 and early 2010. In a lawsuit (Adobe PDF) filed in U.S. Distrcit Court in Southern California, the FTC alleged that the sales of customer lists violated the Fair Credit Reporting Act (FCRA):

"Defendants buy and sell “prescreened lists,” which are lists of consumers that meet certain pre-selected credit criteria. For example, in this case, Defendants bought and sold “prescreened lists” of consumers who were, among other things, 30, 60, or 90 days late on their mortgage payments... Information such as whether a consumer is 30, 60, or 90 days late on their mortgage bears on, among other things, a consumer’s credit worthiness and credit standing and is used or expected to be used as a factor in determining a consumer’s eligibility for credit. Section 604(f) of the FCRA, 15 U.S.C. §1681b(f), prohibits persons from using or obtaining consumer reports in the absence of a “permissible purpose.” In addition, Section 607(e) of the FCRA, 15 U.S.C. § 1681e(e), requires persons who procure consumer reports for resale to establish and comply with reasonable procedures designed to ensure that the consumer reports are only resold for a permissible purpose. The only permissible purpose for using a prescreened list is to make a firm offer of credit or insurance..."

The following companies and individuals were named as defendants in the complaint:

  • Equifax Information Services
  • Direct Lending Source, Inc., based in Key Largo, Florida
  • Bailey & Associates Advertising, Inc., based in Florida and with in El Paso, Texas and San Diego, California
    Virtual Lending Source, LLC, based in San Diego, California
  • Robert M. Bailey, Jr., the Executive Vice President of Direct Lending, Bailey & Associates, and Virtual Lending
  • Linda Giordano, President of Direct Lending, Bailey & Associates, and Virtual Lending and an owner of Bailey & Associates and Virtual Lending

Terms of the settlements require Equifax to pay $393,000 for alleged inadequate procedures that led to the sale of lists of consumer information to companies that it should not have sold the information to. 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. Direct Lending Source will pay a $1.2 million civil penalty,and will be barred from using or selling prescreened lists.


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