FTC Orders Trans Union to Halt Sales of Credit Data
The Federal Trade Commission on Wednesday ordered one of the nation’s biggest credit-reporting agencies, Trans Union Corp., to stop selling the sensitive information it gathers on 160 million Americans to junk mail mavens.
“It’s a strong statement that invasions of privacy by large database companies will not be tolerated,” said David Medine, the FTC’s associate director for financial practices. “Trans Union holds in trust sensitive financial information. The Federal Trade Commission found that they violated that trust by selling that information to marketers in direct violation of the law--essentially, made a calculated financial decision to trade privacy for profits.”
Trans Union is one of three national credit-reporting companies that gather information from banks, mortgage companies, auto dealers and others to help companies figure out which consumers are good credit risks. Exactly who gets to look at that kind of information is laid out in the 30-year-old Fair Credit Reporting Act. The FTC has said since the early 1990s that the law limits access to that information to “permissible purposes,” such as making decisions about granting credit.
Although there are no penalties now, any further violation will result in court action that would cost Trans Union monetary penalties, the FTC said.
The agency has tried to discourage credit-reporting companies from selling the data to direct marketers, and credit reporting giants Equifax and Experian dropped the practice. Trans Union, however, did not accept that interpretation of the law and continued to sell consumer information to direct marketers through a subsidiary, Performance Data.
In a unanimous opinion written by FTC Commissioner Mozelle W. Thompson, the agency concluded that Trans Union violated the Fair Credit Reporting Act by selling information to target marketers that don’t fall under the “permissible purposes” laid out in the act.
“This is obviously a significant development,” said Marc Rotenberg, head of the Electronic Privacy Information Center.
Under the ruling, Trans Union will have to “cease and desist from distributing or selling consumer reports” to those not covered by the credit-reporting laws. Trans Union did not immediately return calls for comment.
The FTC said Trans Union stepped over the line by selling credit information to merchants, allowing them to contact potential new customers.
Trans Union said in a statement that it sells names, addresses and types of credit held by consumers but not details about consumers’ credit status and payment history.
For example, Trans Union sells information about upscale credit card holders to one set of merchants and information about people who appear to be in financial difficulty, such as those with loans from finance companies, to another set of merchants, the FTC said. And people who hold student loans might be targeted by another set of merchants, the FTC said.
That is illegal, and it is illegal for merchants to receive that kind of private information, the FTC held.
Trans Union’s Jan Davis, executive vice president of its PerformanceData division, said in the statement, “Many consumers enjoy receiving catalogs and other offers in the mail. Consumers benefit from receiving offers that target their interests as opposed to the alternative of mass marketing.”
Trans Union still may sell general demographic information about people, such as their names, addresses and other contact information that does not include credit data.
The FTC first brought the case in 1992. After revisions in the law in 1997, providing for monetary penalties of up to $2,500 for each violation, Trans Union altered some of its practices, the FTC said.
