Teletrack Penalized $1.8 Million for Peddling Consumer Credit Reports

credit reportA credit reporting agency agreed to pay a nearly $2 million fine to settle federal charges that it broke the law by selling sensitive financial information about consumers seeking payday loans to marketers.

Teletrack Inc. of Norcross, Ga., will pay the Federal Trade Commission $1.8 million to settle an FTC lawsuit charging it with violating the Fair Credit Reporting Act (FCRA) by selling credit reports to marketers.

Specifically, the FTC accused Teletrack of running afoul of the FCRA and abusing consumer privacy by peddling lists of people who were struggling to keep themselves afloat by applying for "non-traditional credit products" such as payday loans."The fact that a consumer has applied for a payday loan is credit report information protected by the FCRA," FTC Bureau of Consumer Protection Director David Vladeck said in a statement. "The FCRA says a credit reporting agency like Teletrack can't sell a consumer's sensitive credit report information for mere sales pitches."

Teletrack sells credit reports and other related services to businesses such as payday lenders, rental purchase stores, and non-prime rate auto lenders. Most of its customers are also in the business of serving financially strapped consumers and used Teletrack's credit reports to determine whether to offers consumers credit and on what terms.

The FTC complaint said Teletrack created a marketing database of information that it gathered through its credit reporting business. Teletrack then sold the sensitive information in its database -- which included lists of struggling consumers who'd applied for such as payday loans and other non-traditional credit products – to marketers.

For example, Teletrack sold lists of consumers who previously sought payday loans to third parties to target potential customers. The FTC's lawsuit argued these marketing lists represented credit reports under the FCRA, because they contained information about a consumer's creditworthiness.

As such, the FTC said, Teletrack violated the FCRA, which makes it illegal to sell credit reports without a specific "permissible purpose" under the statute – marketing is not considered a permissible purpose.

The settlement order requires Teletrack to ensure it only sells credit reports to companies that it believes has "permissible purpose" to have them under the FCRA or as otherwise allowed by the law.

In addition to $1.8 million civil penalty, Teletrack will be required to satisfy various FTC reporting and record-keeping requirements to make ensure the company complies with the court order.
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