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FTC Announces $3.5 Million Settlement, One of the Largest Ever, in FCRA Lawsuit

Credit-cards.jpgThe Federal Trade Commission (FTC) recently announced that it had settled a lawsuit, United States v. TeleCheck Services, Inc., et al, No. 1:14-cv-00062 (D.D.C., Jan. 16, 2014), involving alleged violations of the Fair Credit Reporting Act (FCRA) for $3.5 million. This amount reportedly equals the second-largest settlement in the history of FCRA claims. The lawsuit alleged that the defendants, a Houston, Texas-based consumer reporting agency and its affiliated debt-collection business, failed to follow procedures required by the FCRA to ensure the accuracy of consumer credit information. In addition to the monetary settlement, the defendants agreed to modify their business practices and submit to compliance monitoring by the FTC for the next ten years.

The FCRA, 15 U.S.C. §§ 1681 et seq., regulates consumer reporting agencies (CRAs), defined as any person or business that routinely gathers or evaluates credit information for third parties. This includes the three well-known national agencies, Equifax, Experian, and TransUnion, as well as businesses that perform credit checks for banks, retail stores, and other businesses. The purpose of the law, according to the FTC, is to promote consumers’ interests in having fair and accurate information about them reported to others, and in maintaining the privacy of that information. The FTC is authorized to enforce the law through lawsuits and administrative action.

The defendants in the present case are a CRA, TeleCheck Services, Inc., that provides credit information to retailers investigating whether to accept personal checks from customers; and an affiliated debt-collection company, TRS Recovery Services, Inc. The FTC claimed that TeleCheck, by compiling consumer credit information and selling it in interstate commerce, meets the FCRA’s definition of a CRA. TRS is a “furnisher of information” under the FCRA because it regularly provides consumer information to a CRA, namely TeleCheck.

The FTC alleged that TeleCheck failed to comply with multiple requirements of the FCRA regarding assuring the accuracy of consumer information, investigating and responding to consumer disputes, deleting incorrect information, and guarding against the reappearance of incorrect information. TRS allegedly failed to maintain policies and procedures for ensuring the accuracy of information furnished to TeleCheck. The FTC’s complaint requested injunctive and equitable relief, as well as statutory damages of $2,500 per violation occurring before February 10, 2009, and $3,500 for every violation occurring on or after that date.

The defendants agreed to a settlement, without admitting or denying liability, before the FTC had filed suit. As a result, the complaint was filed in U.S. District Court for the District of Columbia concurrently with the stipulated final judgment. The defendants will pay a civil penalty of $3.5 million to the FTC and refrain from further FCRA violations. They must submit a compliance report to the FTC within 180 days, and notify the FTC of any changes to their businesses over the next ten years that might alter their compliance. Finally, they must keep certain records regarding consumer complaints and other matters for the next ten years, and provide additional compliance reports upon request.

If you or your business has a contract dispute or other legal matter, you should consult with a skilled business and commercial lawyer. James G. Schwartz has represented businesses in the Bay Area for the past 38 years. To schedule a free and confidential consultation to to discuss your case, please contact us today online or at (925) 463-1073.

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Photo credit: By Lotus Head from Johannesburg, Gauteng, South Africa (sxc.hu) [GFDL, CC-BY-SA-3.0 or CC-BY-SA-2.5-2.0-1.0], via Wikimedia Commons.