Government settlements have been reached with a major credit bureau and a mortgage lead provider over the sale of data on distressed mortgage borrowers.
Equifax Information Services LLC agreed to pay $393,000 to resolve allegations that inadequate procedures enabled the sale of lists of consumer information to firms that should not have received them.
On the other side of those transactions was Direct Lending Source Inc., which agreed to pay a $1.2 million civil money penalty.
The settlements were announced Wednesday by the Federal Trade Commission.
The FTC claims that between 2008 and 2010, Equifax sold in excess of 17,000 pre-screened lists of mortgage borrowers to companies including Direct Lending. Some of the lists were resold to third parties that solicit distressed borrowers for modification and debt-relief services.
The pre-screened lists contained private data that included credit scores and the degree of delinquency for each borrower.
The problem, according to the FTC, was that neither Direct Lending nor affiliates Bailey & Associates Advertising Inc. and Virtual Lending Source LLC had a “permissible purpose” to obtain the lists, as is required by the Fair Credit Reporting Act. The only “permissible purpose” under the FCRA is to make “firm offers of credit or insurance.”
Direct Lending allegedly failed to maintain reasonable procedures to ensure that prospective users had a “permissible purpose” to get them. It also neglected to maintain a record of the criteria used to select consumers for these offers and didn’t take appropriate measures to control access to the sensitive data.
In addition, Equifax had inadequate procedures in place to prevent such violations, as required by Section 5 of the FTC Act.
“Equifax failed to properly investigate when it learned Direct Lending was violating Equifax’s internal policies on prescreening,” the announcement stated. “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.”
As part of its settlement, Atlanta-based Equifax is prohibited from furnishing pre-screened lists unless it has reason to believe there is a “permissible purpose” to receive them. It is also required to maintain procedures that limit potential violations and is generally prohibited from selling pre-screened lists in connection with debt-relief and mortgage-assistance products.
Key Largo, Fla.-based Direct Lending is barred from using or selling pre-screened lists without a “permissible purpose” or in connection with the solicitation of debt-relief or mortgage assistance services. It is prohibited from failing to disclose to consumer reporting agencies the identity and end user for the report and each “permissible purpose” for the end user. It also needs to establish and comply with reasonable procedures that ensure a report is resold only for a purpose for which it has been furnished.
