By Jeff Bater
Dec. 3 — A credit reporting company accused of mishandling consumer information must improve the way it investigates disputes and pay an $8 million fine under a settlement with the Consumer Financial Protection Bureau (CFPB).
The agency took action against Clarity Services Inc., a Clearwater, Fla., company that compiles and sells credit reports to financial service providers, such as payday lenders. The firm, which the agency says focuses on the subprime market, was accused of violating the Fair Credit Reporting Act (FCRA).
The law requires that access to consumer reports be limited to those with a “permissible purpose.” The CFPB said it found that Clarity violated the FCRA by illegally obtaining the consumer reports of tens of thousands of consumers — without a permissible purpose — from other credit reporting companies. The CFPB alleged Clarity used personal consumer information from the reports to help market its products.
The agency also alleged the company failed to investigate consumer disputes, including disputes relating to credit inquiries, even though it was aware that some consumer files were populated with information from unreliable sources.
CFPB Director Richard Cordray said credit reporting plays a critical role in consumers’ financial lives and that the bureau is holding the company accountable for cleaning up the way it does business.
Clarity Services put out a news release acknowledging the settlement, in which the company neither admitted nor denied findings of fact or conclusions of law.
“While we do not agree with the CFPB's allegations, the settlement allows Clarity Services to move beyond this distraction,” said Tim Ranney, the company's president. “We are focused on delivering innovative solutions and excellent service to our customers. The settlement will not affect that level of service or Clarity's level of pricing, innovation or technology platform.”
In its release, the company characterized itself as “the leading provider of real-time fraud detection and credit risk management solutions.” Clarity said it is a credit reporting agency that provides information to providers and develops “efficient and effective data reporting products to help businesses reduce high-risk lending.”
“Clarity's growing database provides information that is not available from traditional reporting agencies, and assists lenders in gaining a competitive advantage by viewing subprime consumer data,” the news release said.
The CFPB said the company must cease its allegedly illegal business practices, which include pulling consumer reports and selling or reselling consumer reports to users who lack a legal purpose, such as lead generators and those companies that are considering purchasing any service from Clarity.
The firm is also required to improve consumer safeguards by implementing policies to ensure users have a permissible purpose to obtain consumer reports and are appropriately credentialed. It must also require consumer data furnishers to provide accurate data and correct data inaccuracies.
In addition, Clarity has to have procedures in place to ensure investigations are conducted when it is informed of a consumer dispute, including disputes about unauthorized credit inquiries.
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