On October 10, 2012, the Federal Trade Commission announced that consumer reporting agency Equifax Information Services LLC (“Equifax”) and several of its customers, including Direct Lending Source, Inc. (“Direct Lending”), have agreed to pay a combined total of nearly $1.6 million to settle FTC allegations that they violated the Fair Credit Reporting Act (“FCRA”) in connection with the sale of data regarding consumers in financial distress. According to the FTC, Equifax sold Direct Lending and its affiliates lists of individuals who met selected criteria (known as “prescreened lists”); the lists contained information such as credit scores and mortgage payment status. In its complaint, the FTC alleges that Direct Lending and its affiliates did not have a legally permissible purpose under the FCRA to obtain the prescreened lists because they had no intention to use the lists to make firm offers of credit. Instead, these entities allegedly resold the lists to third parties that used the lists for marketing purposes. The FTC alleges that Equifax had inadequate procedures to prevent this from happening and that it failed to properly investigate when it learned that Direct Lending was engaged in these activities.

Under Equifax’s proposed settlement with the FTC, Equifax will pay $393,000. Under the FTC’s proposed settlement with Direct Lending and its affiliates, those defendants will pay a $1.2 million civil penalty. View a copy of the FTC’s complaint against Direct Lending and its affiliates.