Sometimes it’s great to put stuff to more than one use. Think the versatile Swiss Army knife, the iconic Little Black Dress, or the typical elementary school “cafetorium” where kids can eat lunch, shoot hoops, and put on plays. But when what’s at issue is information from people’s credit reports, that kind of double duty can violate the Fair Credit Reporting Act — as the FTC’s $1.8 million settlement with Teletrack, Inc., makes clear.
In FCRA parlance, Teletrack is a “consumer reporting agency.” Its primary line of work is selling credit reports to payday lenders, rent-to-own stores, non-prime rate auto lenders, and other companies that serve non-traditional credit customers. Companies use the reports to decide whether they’ll extend credit, and on what terms.
When prospective customers apply for credit, they give the payday lender or car lot rafts of personal information. The company, in turn, passes the data on to Teletrack when they ask for a credit report on the customer.
But Teletrack had a sideline business. In addition to using that information to provide credit reports, Teletrack put it to further use by creating a separate marketing database of people who had applied for credit with payday lenders, rent-to-own stores, etc. Teletrack then sold their names and addresses to marketers looking to pitch them other stuff. For example, Teletrack sold lists of people who’d sought payday loans to companies that wanted to use that information to target potential customers.
As the FTC’s complaint alleges, those marketing lists are “consumer reports” under FCRA because they contain info about a person’s creditworthiness. But under FCRA, consumer reporting companies can’t sell credit reports without a specific “permissible purpose.” According to the FTC, hoping to make a buck by selling marketing lists isn’t one of those “permissible purposes.”
Filed in federal court in Georgia, the FTC’s settlement with Teletrack requires the company to change its business practices and imposes a $1.8 million civil penalty.