On April 29, 2021, the Federal Trade Commission (“FTC”) announced that it had reached a settlement with a Utah-based home security company to resolve allegations that the company misused consumer credit reports when determining whether prospective customers qualified for financing to purchase the company’s products and services.
In a complaint filed by the Department of Justice on behalf of the FTC, the government alleged the company’s sales representatives violated the Fair Credit Reporting Act (FCRA) by using the credit information and history of individuals with the same or similar names to prospective (and otherwise unqualified) customers. The complaint also alleged the company’s sales representatives would ask consumers to provide names of friends or family members with better credit, and then add those third parties as co-signers to the account without obtaining proper permission. If a customer that qualified for financing through one of these deceptive tactics later defaulted, the company allegedly still referred the unwitting third party to a debt collector.
Under the settlement, the company will pay a $15 million civil penalty and provide $5 million directly to allegedly injured customers.