Credit reporting firm Equifax Inc. will pay $393,000 to resolve allegations it broke the law by selling lists of consumers who were late on their mortgage payments, the Federal Trade Commission said Wednesday.

The lists of consumer names, credit scores and details about late mortgage payments were sold to Direct Lending Source and its affiliates, who then sold the data to companies that marketed loan modification and debt relief services to the people on the lists, the FTC said.

Direct Lending Source agreed to pay $1.2 million to resolve the allegations, the FTC said.

In the two separate actions, both Equifax and Direct Lending Source were charged with violating the FTC Act and the Fair Credit Reporting Act (FCRA).

According to the FTC, Equifax sold more than 17,000 prescreened lists of consumers to companies including Direct Lending Source Inc., which subsequently resold some lists to third parties, who used their data to pitch loan modification and debt relief services to people in financial need.

Along with the monetary settlement, Equifax is banned from: furnishing prescreened lists to anyone that it does not have reason to believe has a permissible purpose to receive them; failing to maintain reasonable procedures to limit the furnishing of prescreened lists to anyone except those who have a permissible purpose to receive them; and selling prescreened lists in connection with offers for debt relief products or services and mortgage assistance relief products and services, when advance fees are charged, with limited exceptions.

Direct Lending Source is barred from using or selling prescreened lists without a permissible purpose, or in connection with solicitations for debt relief or mortgage assistance relief products or services.

The FTC alleged that between January 2008 and early 2010, Equifax sold Direct Lending Source and its affiliates lists of people who met selected criteria – known as prescreened lists. According to the agency’s complaint, the lists contained information about millions of consumers, including sensitive information such as credit scores and whether they were 30, 60 or 90 days late on their mortgage payments.

According to the FTC, neither Direct Lending Source nor its affiliates, Bailey & Associates Advertising Inc. and Virtual Lending Source LLC, had a legally permissible purpose to obtain the prescreened lists. 

Under the FCRA, the only permissible purpose for obtaining a prescreened list is to make “firm offers of credit or insurance” – which are offers that will be honored if consumers meet pre-selected criteria. Using a prescreened list for general marketing purposes is not allowed.              

The FTC alleged that, in addition to providing the lists to entities without a permissible purpose and having inadequate procedures to prevent this from happening, Equifax failed to properly investigate when it learned Direct Lending Source was violating Equifax’s internal policies on prescreening. 

The FTC also alleged that Equifax knew or should have known that in many cases Direct Lending Source resold the lists without telling Equifax who would end up using the information. Despite these failures, the FTC alleged Equifax continued selling the prescreened lists.  

Equifax said it is not admitting any wrongdoing or violations of the law as part of the agreement. It said it stopped doing business with Direct Lending Source and its affiliates during the summer of 2011.


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