Credit Reporting Company Charged with Illegally Obtaining Credit Reports

Credit Reporting Company Charged with Illegally Obtaining Credit Reports
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December 3, 2015

The Consumer Financial Protection Bureau (CFPB) is taking action against a credit reporting company and its owner for illegally obtaining consumer credit reports and failing to appropriately investigate consumer disputes.

The Bureau is ordering Clarity Services and Tim Ranney to halt their illegal practices and improve the way they investigate consumer disputes and obtain, sell, and resell consumer credit reports. The company and Ranney must also pay an $8 million penalty.

Focusing on the subprime market, the company compiles and sells credit reports to financial service providers, such as payday lenders. Clarity purchases credit reports from other credit reporting companies, supplements these reports with alternative data, and resells the repackaged reports to be used in underwriting decisions. Companies that purchase Clarity's consumer reports are often lenders making small-dollar loans to consumers who have thin credit files.

The company is charged with illegally obtaining consumer reports without permission. Clarity and Ranney generated marketing materials for prospective clients by illegally obtaining tens of thousands of consumer reports from other credit reporting companies without a permissible purpose. Clarity and Ranney used personal consumer information from these reports to help market its products.

The company also failed to investigate failed to investigate consumer disputes, including disputes relating to credit inquiries, even though it was aware that some consumer files were populated with information from unreliable sources. Specifically, the company would not investigate a dispute if a consumer did not supply supporting documents. Even when a consumer identified specific tradelines and the reason why the consumer thought the item was inaccurate or incomplete, Clarity would not reinvestigate unless the consumer provided specific documentation. Clarity also failed to investigate disputes related to identity theft and routinely failed to provide information to furnishers about consumer disputes.

The full order can be found here.