Credit Reporting Litigation

The Fair Credit Reporting Act (FCRA) establishes a “permissible purpose” for providing credit reports to third parties. These permissible purposes include: (1) the extension of credit; (2) employment purposes; (3) underwriting of insurance; (4) determination of license eligibility; (5) risk assessment for an existing credit obligation; and (6) legitimate business need for the information. In December, 1992, the Federal Trade Commission (FTC) filed a complaint against the Trans Union Corporation (TU) alleging that it violated the FCRA by compiling “for sale to clients, lists of consumers, based in whole or in part on information collected in its consumer reporting database bearing on the characteristics enumerated in Section 603, thereby creating consumer reports, and providing such consumer reports in the form of target marketing lists to persons that do not intend to make a firm offer of credit to all those consumers on the list and who intend to use the information for purposes not authorized under [the FCRA].” 

In October, 1997, TU “discontinued some of the practices that were the most problematic under the FCRA. Specifically, the company stopped providing certain information about open dates of loans, high credit amounts, most loan types, and whether a student loan was closed. Trans Union also ceased providing to target market customers its modeled products.” However, in December 1997, TU “reintroduced the practice of selling ‘type of tradeline’ information.” 

After further litigation, in February of this year the Federal Trade Commission confirmed the findings of the Administrative Law Judge. Specifically, the Commission ordered TU to:

a.       Cease and desist from distributing or selling consumer reports, including those in the form of target marketing lists, to any person unless respondent has reason to believe that such person intends to use the consumer report for purposes authorized under Section 604 of the FCRA.

b.      Maintain for at least five (5) years from the date of service of this Order and upon request make available to the Federal Trade Commission for inspection and copying, all records and documents necessary to demonstrate fully its compliance with this Order.

 Further litigation seems likely.