Lungren Joins Suit Accusing TRW of ‘Illegal Practices’

Alleging widespread errors that have damaged credit records of thousands of consumers, Atty. Gen. Dan Lungren joined in a lawsuit Monday against TRW Inc. that accuses its Credit Data Division of illegal credit reporting practices and of unlawfully selling credit-derived information to junk mailers.

The suit, filed in a state court in Dallas, charges that TRW engaged in a “continuing series of illegal practices” that invaded consumers’ privacy and ruined their good credit ratings. Lungren filed the lawsuit along with attorneys general in Texas, Alabama, Idaho and Michigan.

A TRW spokesman could not be reached for comment Monday evening. But the firm has vehemently denied similar allegations in the past. Overall, TRW has said it has an error rate of less than 2%.

The suit asks the court to order changes in TRW’s credit reporting procedures and for unspecified damages. Although best-known in Southern California for its aerospace activities, TRW operates one of the nation’s three-largest credit reporting agencies. The division is based in Orange.

The agencies keep tabs on the bill-paying habits of more than 160 million Americans. Credit grantors, from car dealers to department stores, check TRW’s database when a consumer wants to make a purchase on credit. If a report contains negative information--such as a late bill payment or a bankruptcy--a consumer may be denied a mortgage, an auto loan, or a chance to obtain a credit card.

TRW Credit Data Services and the two other giants of the industry, Equifax Inc. of Atlanta and Trans Union Corp. in Chicago, have been accused for years of making mistakes that damage the credit standing of consumers with unblemished records and of dragging their feet in making corrections.

But TRW was singled out for the suit because a large number of complaints have been received by state agencies and the Federal Trade Commission about its practices, said Deputy Atty. Gen. Susan E. Henrichsen, a spokeswoman for Lungren.

The lawsuit charges that TRW has failed to take precautions to prevent errors from showing up in the files of credit-worthy consumers and for failing to adequately follow up on consumer’s complaints of such errors. Even if a consumer is able to persuade TRW to make a correction in his or her file, the suit alleges that sometimes the same error reappears.

Often, the mistakes are because of mix-ups in which TRW confuses credit information on people with similar names or of different members of the same family.

In addition, the suit alleges that TRW is violating the states’ credit laws by selling names and addresses that it obtained for its credit records to marketers. TRW says it never divulges specific credit information. But it acknowledges selling lists tailored to a set of personal characteristics--including estimated income or age--desired by companies that try to target their mail solicitations.

TRW officials say that they simply operate an information repository, much like a public library, and that they sometimes receive wrong information from the stores that issue credit. In those cases, they say that consumers need to go directly to credit providers to clear up the mistakes.

TRW has also said its sales of direct-marketing mailing lists are not illegal, because the data is very unspecific. Details about an individual’s income is never released, for instance, though individuals might be grouped into categories based on income.

TRW officials have also said they never allow the buyer of direct-marketing data to see the lists of names and addresses that they are purchasing. Instead, they say, the lists are sent directly to third-party mailing houses without any reference to the criteria on which the names were selected.

But Henrichsen said that TRW’s justifications of its direct marketing sales constitute a “weak, tortured argument.”

She added: “We don’t think this takes into account protection of privacy.”

Allegations similar to those made by the lawsuit have been voiced for three years to a congressional subcommittee that has been considering changes in the Fair Credit Reporting Act, which regulates the credit reporting industry.