FTC challenges TeleCheck's checkered compliance with the Fair Credit Reporting Act

Whooping it up can be fun, but hooping it up – requiring consumers to jump through hoops to exercise their rights under the Fair Credit Report Act – is illegal.  That’s one message businesses can take from the FTC’s $3.5 million settlement with TeleCheck.

Houston-based TeleCheck Services offers retailers an on-the-spot recommendation about whether to accept a shopper’s check.  Its affiliate, TRS Recovery Services – also named in the FTC’s lawsuit – handles consumer debt taken on by TeleCheck.  With over 400,000 subscribers in 375,000 locations, TeleCheck is a big name in the check authorization business.  Its recommendations are “consumer reports” as defined by the FCRA, triggering certain consumer rights.  And that’s where the FTC says TeleCheck went wrong.

Under the law, when a consumer tries to pay by check and the merchant, a TeleCheck subscriber, declines the check based on TeleCheck’s recommendation, the merchant must provide the person with a notice that tells them:

  1. that the decision was based on information provided by TeleCheck,
  2. that they have a right to get a free copy of what TeleCheck has on file about them,
  3. how to get in touch with TeleCheck, and
  4. how to exercise their legal right to dispute the accuracy of the information.

Once a consumer disputes the info, TeleCheck has an obligation under the FCRA to conduct a reasonable reinvestigation.  But according to the FTC, that’s not always what happened.

The FTC says in some cases, TeleCheck falsely told people the only valid reasons for disputes under the FCRA are the amount of the transaction, the date, and whether services were rendered.  Furthermore, the complaint alleges that TeleCheck illegally turned the tables on some consumers by putting the burden on them to reinvestigate.  For example, if consumers said they hadn’t authorized a transaction, TeleCheck sat back and told them to contact the merchant – a violation of the company’s obligation under the FCRA to reinvestigate the matter itself.

The FTC also says TeleCheck required consumers disputing information to jump through hoops in ways the law doesn’t allow.  For example, what if a consumer told TeleCheck they suspected a transaction was fraudulent?  According to the complaint, under certain circumstances, TeleCheck refused to reinvestigate or clear the disputed information from the file until the consumer submitted a police report identifying the suspect and agreed to participate in the suspect’s prosecution.

That's just one way the FTC says TeleCheck didn't live up to its FCRA obligations.  The FTC also charged that TeleCheck failed to use reasonable procedures to assure the maximum possible accuracy of the information in its files.  In addition, the complaint takes aim at TRS Recovery Services for failing to comply with requirements under the Furnisher Rule about the accuracy and integrity of the information it provides to credit reporting agencies.

The $3.5 million civil penalty is among the FTC's largest ever in an FCRA case and the proposed consent decree puts procedures in place to see that TeleCheck and TRS clean up their FCRA act in the future.

Visit the FTC’s credit reporting page for free compliance resources, including the nuts-and-bolts brochure, Consumer Reports: What Information Furnishers Need to Know.

 

2 Comments

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This penalty is just a big joke to Telecheck. I was once again denied writing a check for no apparent reason. Upon calling Telecheck today, 3/9/14, nothing has changed in the least bit. The agent I talked to stated that there was negative information in my profile but refused to tell me what it was or involving. Only after I started screaming at the guy and demanded a supervisor did I get anywhere. After I warned her that Telecheck is in violation of the FCRA and demanded that the information deemed negative in my report be mailed to me that she agreed to. But based on what I found in this article, I highly doubt I will ever receive that information.

Wow, we used to use telecheck and I always assumed they were already doing this. Our dealership quite even taking checks but they are a fairly big company. Crazy. Does this apply to the other companies like this too?

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