The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.

Skip to Content

CFPB Hits Credit Reporting Agency with $8 Million Penalty for FCRA Violations

Credit Card

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) recently ordered a Florida subprime credit reporting company and its owner to pay an $8 million civil penalty and to halt illegal practices in a December 3 Consent Order.

Clarity Services, Inc., a consumer reporting agency headquartered in Clearwater, Florida does business throughout the U.S., focusing on the subprime market. As part of its business model, Clarity compiles and sells credit reports to financial service providers, including check cashers, credit card and prepaid card issuers, collection agencies, auto loan providers, and installment lenders. Clarity describes itself on its website as providing “powerful real-time fraud detection and credit risk management solutions for Middle America.” The company is a “covered person” under the Dodd Frank Consumer Financial Protection Act because it offers a consumer product or service.

The CFPB found that Clarity violated the Fair Credit Reporting Act (FCRA) by accessing hundreds of thousands of fully-identified consumer reports from third-party credit reporting agencies to compile marketing presentations for prospective lender clients without permission.  According to the Consent Order, in one instance, notwithstanding objections from Clarity’s staff, Clarity obtained over 190,000 consumer reports to create a marketing presentation. The FCRA requires that access to consumer reports be limited to those with a “permissible purpose,” such as for use in underwriting decisions, which helps to ensure that consumer privacy rights are protected. The CFPB found that Clarity was pulling reports for the impermissible purpose of marketing its services, and such inquiries often appeared on the consumer’s credit file as a permissible inquiry by a lender. When lenders and consumers questioned these inquiries, Clarity asked the credit reporting companies to delete evidence of its unauthorized access of the consumers’ reports.

The CFPB further found that Clarity failed to properly investigate consumer disputes, including but not limited to, disputes regarding unauthorized credit inquiries, even though Clarity was aware that some of the information contained in its consumer files was from unreliable sources. Clarity improperly refused to open a reinvestigation if a consumer’s dispute lacked “supporting documentation,” even when a consumer identified specific tradelines and the reason why the consumer believed the item was inaccurate or incomplete. Clarity further failed to provide information regarding consumer disputes to furnishers and failed to perform reinvestigations where consumers made claims of identity theft. Among other things, Clarity failed to notify furnishers of disputes and failed to promptly notify consumers of the results of its investigations. All of these actions were found to be violations of the Fair Credit Reporting Act.

Clarity and its owner Timothy Ranney were ordered to pay an $8 million civil monetary penalty. They were further ordered to stop pulling consumer reports for marketing purposes or the purpose of selling them to users who lack a legitimate purpose and to implement policies and procedures to ensure that users have a permissible purpose to obtain consumer reports. They must also require consumer data furnishers to provide accurate data and correct data inaccuracies. Finally, Clarity must improve its policies and procedures for investigating consumer reports and may not impose any impermissible preconditions for investigation, such as requiring documentation or other evidence before commencing an investigation.

Pursuant to Dodd Frank amendments, certain FCRA enforcement functions and all regulatory authority were transferred from the FTC to the Bureau. Additionally, while the FTC may seek limited penalties for violations, only the CFPB may require monetary remediation and impose discretionary civil penalties through its administrative enforcement authority. The action against Clarity and its owner is the Bureau’s tenth enforcement action asserting violations of the FCRA.

View the CFPB Order »

Authored By
Related Practices
Consumer Finance
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.