Ed's Blog

This week the Federal Trade Commission (FTC) ordered the massive credit bureau Equifax to disgorge $393,000 in ill-gotten profits and its customer, Direct Lending Source, to pay a $1.2 million civil penalty for selling lists of credit reports for illegal marketing purposes. Equifax must disgorge the profits "to resolve allegations that its inadequate procedures led to the sale of lists of consumer information to firms that should not have received them." According to the FTC,  the Equifax customer Direct Lending   resold the lists, which are credit reports and under the law can only be used for "firm offers of credit or insurance," not for general target marketing. It sold them to firms  "who used their data to pitch loan modification and debt relief services to people in financial distress." The FTC basically said that Equifax ignored many obvious clues, failed to have proper procedures, etc.

We are pleased that the FTC has gone after this practice, which stops Direct Lending Source's customers from going after people already facing financial distress and marketing junky solutions that seem dsigned to take their last dollars.

Nevertheless, we do wonder why Equifax didn't face a civil penalty of its own, merely a disgorgement. Was the case that thin? As long ago as 1997 Equifax had spun off the firm ChoicePoint, specifically so it could act as a "data broker" selling unregulated products outside the Fair Credit Reporting Act's strict rules about the use of credit reports. And for over ten years, culminating in a very public victory in the highest U.S. courts, the FTC battled the Equifax competitor Trans Union over its own sale of pre-screened lists of credit reports for illegal target marketing purposes. How could Equifax have not known it needed better practices when selling regulated lists?

Meanwhile, Senate Commerce Chairman Jay Rockefeller has announced his own investigation into the practice of unregulated data brokers, the close cousins of the credit bureaus which were already the subject of an inquiry by House leaders of the bi-partisan Privacy Caucus.

“Collecting, storing and selling information about Americans raises all types of questions that require careful scrutiny,” said Rockefeller. “While these practices may offer some benefits to consumers, they deserve to know what’s being collected about them and how companies profit from their information. We are sending letters to nine different companies today to learn how this industry works.”

In her New York Times story on the Rockefeller inquiry, reporter Natasha Singer quotes FTC commissioner Julie Brill, who describes a problem we have long been concerned with:

“There are data brokers whose marketing lists may not cross the line into credit reports but come very close,” said Julie Brill, a member of the F.T.C. “The question is whether the lists are being used for marketing purposes or for something very close to credit purposes."

We agree. As I explain in a previous blog entry, the practices of data brokers  look more and more and more like those of the regulated credit bureaus.

Meanwhile, Singer also quotes industry lobbyist Linda Wooley, who has some pretty sharp words for the Senator:

Linda A. Woolley, the acting chief executive of the Direct Marketing Association, a trade group, called the senator’s investigation “a baseless fishing expedition.” “I hope Senator Rockefeller understands what he’s tampering with,” she said in an e-mailed statement.

Really? Senator Rockefeller isn't tampering, and his efforts are not baseless. He is conducting crucial oversight of a virtually unregulated industry that has launched a multi-pronged attack on all inquiries into its practices. The marketers have rocks that they don't want consumers, reporters, regulators, or Congress looking under, lots of rocks. Let's keep turning them over and see what the marketers have to hide.


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People and negotiators are so careful nowadays especially if it is a public content and matter. There is no surprise is that; a published material is so tightly concerned with the mortgage business party. Because if there are flaws in the settlement, that means public will make them pay.

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