First Data Corp. subsidiary TeleCheck Services Inc., and its affiliate TRS Recovery Services Inc., agreed on Jan. 16, 2014, to pay $3.5 million to settle Federal Trade Commission charges that the entities violated the Fair Credit Reporting Act (FCRA). This was the second such settlement in recent months. In August 2013, Certegy Check Services Inc. agreed to pay $3.5 million in a similar settlement with the FTC.
The FTC alleged that neither TeleCheck nor TRS followed proper dispute procedures for investigating consumer disputes. The FTC also charged they did not follow reasonable procedures to assure accuracy of information provided to merchant clients as required by the FCRA for credit reporting agencies (CRAs) under what is known as the Furnisher Rule. Enacted in 1970, the FCRA regulates the collection, dissemination and use of consumer credit report information.
"The FTC is one of the federal agencies that enforce the Fair Credit Reporting Act," said Katherine Armstrong, Attorney, Division of Privacy and Identity Protection at the FTC. "We often look at consumer complaints that are submitted to the FTC and look for patterns.
"Basically, it was consumer complaints that we received about both of these companies that spurred our interest in bringing the investigations, and our investigations focused on their compliance with the FCRA. The FCRA is a very specific statute. If you are a consumer reporting agency and you handle consumer report information, then you have to comply with the FCRA. Specifically, our investigations focused on how each company handled consumer disputes."
The FTC has brought over 100 FCRA cases since the law first went into effect 44 years ago. In 1996, the statute was amended to allow civil penalties to be sought in certain cases. With the passage of the 2010 Dodd-Frank Act, the FTC now shares FCRA enforcement jurisdiction with the Consumer Financial Protection Bureau, Armstrong noted.
"This case is part of a broader initiative to target the practices of data brokers, which often compile, maintain and sell sensitive consumer information," the FTC noted in a press statement. "Consumer reporting agencies like TeleCheck are data brokers that sell information to companies making important decisions about consumers, such as their ability to get credit or pay for goods and services by check."
In a December 2013 statement presented before the U.S. Senate Committee on Commerce, Science and Transportation, the FTC pointed out that data brokers collect and aggregate consumers' personal information from a variety of sources, which they resell for an array of purposes, such as marketing, identification and financial fraud prevention.
In a prepared statement, Jessica Rich, Director of the FTC's Bureau of Consumer Protection, stated, "Because data brokers generally never interact directly with consumers, consumers are typically unaware of their existence, much less the variety of ways they collect, analyze and sell consumer data. The Committee, by investigating the privacy practices of data brokers, has helped call attention to the lack of transparency surrounding data broker privacy practices."
Commenting on the TeleCheck case, Rich said, "[I]f CRAs like TeleCheck provide merchants with inaccurate information, those merchants may wrongly deny consumers the ability to buy even the most essential items, like food and medicine." She believes consumers without alternative means of payment, such as credit cards, will benefit from the settlement on behalf of check users. 
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