EMBARGOED UNTIL 12:00 NOON, DECEMBER 10, 1991
TRW AGREES TO SETTLE FTC AND STATE CHARGES OF ALLEGED
VIOLATIONS OF THE FAIR CREDIT REPORTING ACT
TRW Inc. -- which, as one of the nation's largest credit
bureaus, maintains credit information on approximately 170
million consumers -- has agreed to settle Federal Trade
Commission charges that it has violated the Fair Credit Reporting
Act ("FCRA"), a federal law that regulates the privacy and
accuracy of consumer reports. The FTC has charged TRW with
failing to assure the maximum possible accuracy of the consumer
credit information it compiles and sells to credit grantors and
employers nationwide, among other alleged FCRA violations.
The consent order settling these charges, filed today in
federal district court in Dallas, Texas, is designed to improve
the accuracy of the information TRW compiles. It requires the
company, among other things, to institute new accuracy monitoring
systems and to enhance procedures for handling consumer disputes.
The FTC's settlement with TRW comes in conjunction with the
settlement of two cases collectively brought by 19 state attor-
neys general. The Commission particularly acknowledges the
cooperation of the state attorneys general of Texas, California,
New York, Missouri, Arkansas, and New Mexico. The states'
settlement, also announced today, incorporates all of the FTC's
substantive provisions, as well as a number of provisions
addressing alleged violations of state laws.
According to the FTC complaint, TRW has violated the Fair
Credit Reporting Act by:
-- failing to maintain and follow reasonable procedures to
assure maximum possible accuracy of the information
contained in its consumer reports;
- more -
TRW Inc.--12/10/91)
-- failing, within a reasonable period of time, to reinves-
tigate information in credit reports that has been disputed
by the consumer and to disclose to consumers their rights
and obligations concerning reinvestigation;
-- failing to promptly delete inaccurate or unverified
information from consumer reports;
-- furnishing consumer reports to persons TRW did not have a
reason to believe intended to use the information for a
permissible purpose; and
-- failing, when providing consumer reports containing
adverse public-record information to third parties for
resale to employers, to maintain procedures to ensure that
the public-record information is complete and up to date,
or, as the law alternatively requires, that consumers are
notified that such a report was made and told the name and
address of the recipient.
Under the consent order settling these charges, TRW is
required to adopt procedures to prevent the occurrence of mixed-
file errors -- that is, reports that contain credit or other
information about someone other than the subject of the report
(for example, parents with children with similar names). These
procedures include modifying TRW's computer software system to
enable the system to use more complete consumer-identifying
information from credit grantors before adding credit data on
consumers to TRW's credit reporting database. When consumers'
disputes indicate that an error may result from a mixed-file
error, TRW must employ special reinvestigation procedures speci-
fically designed to address such errors. In addition, by July
31, 1992, TRW must implement a system to prevent the recurrence
of specific mixed-file errors, once they have been identified.
Under the consent order, TRW also is required to reinvesti-
gate information disputed by a consumer in his or her credit
report within 30 days. If TRW does not verify the information
within that time period, it must delete it. Also, when reinves-
tigating disputed information, TRW is required to convey the
nature and substance of the consumer's side of the story to the
credit grantor that had provided the information. And, when a
consumer provides TRW with documentation from a credit grantor
confirming the consumer's version of a dispute, TRW is required
to accept that documentation unless it has reason to doubt its
authenticity. TRW also is required to clearly and fully disclose
to consumers, in accordance with the FCRA, their rights and TRW's
obligations with respect to disputed information.
(TRW Inc.--12/10/91)
In addition, the consent order requires TRW to implement
procedures to assure that no seriously derogatory information
which has been deleted after being disputed by the consumer
reappears on the consumer's credit report unless (1) the infor-
mation has been reverified, and (2) TRW advises the consumer in
writing that the information has been reinserted in the credit
file. TRW must meet the same requirements for any disputed and
subsequently deleted information -- seriously derogatory or
otherwise -- by the end of 1992.
Concerning the practice of compiling information from
consumers' reports for specified credit-related characteristics,
a process known as prescreening, the consent order mandates that
TRW require purchasers of these prescreened lists to make a firm
offer of credit to every person who appears on the list. This
requirement reflects the Commission's interpretation of the
limits that the FCRA places on the dissemination of consumer
report information.
With respect to consumer reports that TRW sells to third
parties -- such as brokers or other consumer reporting agencies
-- for resale to employers for employment decisions, the consent
order requires TRW to ensure that such third-party purchasers
specify that the reports will be used for employment purposes
when obtaining the report from TRW. Under this provision, TRW is
required to notify the consumer whenever it issues a report for
employment purposes containing public-record information that is
likely to adversely affect the consumer's ability to obtain
employment, and to provide the consumer with the name and the
address of the third party that, in turn, can identify the
employer seeking the report. The FCRA requires consumer
reporting agencies to provide such notice to consumers unless
they maintain strict procedures to ensure that public record
information in employment reports is complete and up to date --
an alternative form of compliance that is available to TRW under
the order.
The consent provides as "fencing-in" relief that TRW must
disclose to consumers who request credit reports after Dec. 31,
1992, any risk score associated with their credit report. A
risk score is a numerical value based on credit information and
derived from statistical models that are used by creditors to
predict the creditworthiness of consumers. This provision will
help prevent, in the future, the kinds of inaccuracies in
consumer reports that the complaint alleges.
The consent order specifically preserves the FTC's right to
bring an enforcement action against TRW based on practices
related to the sale to clients of lists of consumers with certain
credit-related characteristics that are not developed through
prescreening.
(TRW Inc.--12/10/91)
Finally, TRW is required under the order to establish a
five-year monitoring system to determine whether and how well the
above procedures and changes it makes to its system reduce the
incidence of mixed files. TRW must propose such a system for FTC
approval within 180 days. As an additional measure to assist the
FTC in monitoring the effect of the order, TRW is required to
submit, on an annual basis for five years, detailed information
about the total number of consumer credit reports it issues to
consumers and how many of them are disputed.
In a separate statement, Commissioner Mary L. Azcuenaga
said, "Although I generally support the Commission's action, I
dissent from the inclusion of a 'good faith' limitation on the
respondent's liability for compliance with portions of the
order."
The complaint and consent order were filed in U.S. District
Court for the Northern District of Texas, in Dallas, this
morning. The settlement was approved by the court.
NOTE: This consent order is for settlement purposes only and
does not constitute an admission by the defendant of a law
violation. Consent orders have the force of law when signed by
the judge.
Copies of the complaint and consent order are available from
the FTC's Public Reference Branch, Room 130, 6th Street and
Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222;
TTY 1-866-653-4261.
# # #
MEDIA CONTACT: Brenda A. Mack, Office of Public Affairs
202-326-2182
STAFF CONTACT: David Medine, Bureau of Consumer Protection
202-326-3224
(Civil Action No. 3-91-CV2661-H)
(TRW)