This week the Federal Trade Commission entered into a consent decree with Certegy Check Services, one of the nation’s check authorization service companies, pursuant to which Certegy has agreed to pay $3.5 million to settle charges that it violated the Fair Credit Reporting Act (FCRA). This massive penalty – the second largest ever – reinforces the perception that the FTC will continue vigorous enforcement against what it perceives as violations of that venerable statute, first passed in 1970.
The FCRA establishes obligations not only for the three big consumer reporting agencies (CRAs) – Experian, Transunion, and Equifax – but also for “nationwide specialty consumer reporting agencies”. These are CRAs that compile and maintain files on consumers on a nationwide basis relating to medical records or payments, residential or tenant history, check writing history, employment history, or insurance claims. Certegy, which falls within this latter category of entities subject to the FCRA, was obligated to “follow reasonable procedures to assure maximum possible accuracy” in the reports it provided concerning consumers’ financial information, and was also obligated to investigate any consumer dispute regarding such informationwithin a reasonable period of time, to report back to the consumer, and to delete any information that is inaccurate, incomplete, or unverifiable.
While Certegy is not as well known to consumers as the big three credit reporting agencies, it plays an important role in consumer transactions. When people want to pay by check, many businesses rely on Certegy for a check authorization recommendation that is based in part on information in its files about consumers’ check writing history. Certegy also furnishes information to other credit reporting agencies, which may multiply the effect of any inaccuracies.
The FTC alleged in its complaint that Certegy failed to comply with many of its obligations as a nationwide specialty consumer reporting agency. Among other things, the FTC asserted that Certegy would not undertake the required reinvestigation of allegedly inaccurate information, and would place unfair burdens on consumers in connection with requests for such reinvestigations. The FTC states that this is its first case alleging a violation of the so-called “Furnisher Rule” relating to regulations governing such entities that furnish credit report information on consumers.
The stipulated order will certainly change the way that Certegy does business but, perhaps even more important, the $3.5 million penalty should attract the attention of other entities whose businesses are subject to the FCRA. Such businesses would be wise to revisit their policies and procedures to ensure that they comply with the obligations under the statute and related regulations to ensure that they will not be the next target of FTC enforcement in this area.