We have previously touched on the Fair Credit Reporting Act (FCRA) requirement to have a permissible purpose to obtain a background report (called a “consumer report” under the FCRA). As we talked about, there are a number of permissible purposes defined in the FCRA including, employment purposes or for certain credit transactions.
We also discussed the Federal Trade Commission’s (FTC) advice for a company that was thinking about using a consumer report for more than one permissible purpose. But what about using a consumer report for an impermissible purpose?
Just as in our previous article, the FTC has some advice for this scenario, too: Don’t do it.
The FTC announced a settlement with a California-based mortgage broker to settle allegations that the mortgage broker violated the FCRA by using consumer report information for an impermissible purpose, among other claims.
In its complaint, the FTC alleged that the mortgage broker took private information from consumer reports and posted it on the publicly-available review site Yelp. The FTC claimed this was done as a response when a consumer left a negative review of the company on the site.
According to the FTC’s complaint, “…the FCRA enumerates the permissible purposes for which a consumer report may be used. Section 604(f) of the FCRA, as amended by the FACT Act, makes it unlawful to use a consumer report for any purpose other than those enumerated.” The complaint goes on to allege that “None of the Yelp responses [by the mortgage broker] containing [consumer] report information was communicated in connection with any pending credit decision related to the reviewing consumer, or for any other permissible purpose…”
As Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, stated in the press release announcing the settlement, “Companies that use [consumer] reports and scores have a legal obligation to keep that information confidential. They should not disclose that information to third parties without a legitimate reason to do so, and they certainly should not post that information on the internet to embarrass or punish consumers, as happened here.”
Using consumer report information for a permissible purpose is important, and the FTC is taking enforcement action when a company uses a consumer report for impermissible purposes. The mortgage broker in this case wound up having to pay $120,000 to settle the FTC complaint, in addition to having other prohibitions imposed on it.
Ensure that you’re using consumer reports for a permissible purpose. Are you unsure if you’re using them for an impermissible purpose? It may be a good idea to discuss your use of consumer reports with your legal advisors to make sure you’re staying in compliance with the FCRA and other applicable laws.