ANALYSIS OF PROPOSED CONSENT
IN THE MATTER OF QUICKEN LOANS INC., DOCKET NO. 9304
The Federal Trade Commission has accepted an agreement, subject to final approval, to a proposed consent order from Quicken Loans Inc. The proposed order would settle charges that Quicken Loans violated Section 615(a) of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 168lm(a), and Section 5 of the Federal Trade Commission Act. Section 615(a) requires that a credit grantor who takes adverse action with respect to a consumer, based in whole or in part on information contained in a credit report ("consumer report"), notify the consumer of the adverse action as well as the identity of the credit bureau ("consumer reporting agency") that produced the report, so the consumer can identify and correct any inaccuracies in the report.
The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement and take other appropriate action or make final the agreement's proposed order.
According to the Commission's Complaint, for a period of approximately one year, Quicken Loans offered loans to consumers through its website. Quicken Loans invited consumers to submit information, such as their income and assets, and the loan amount, down payment and type of loan sought. Consumers then were invited to request that Quicken Loans either "prequalify" the consumer for a loan based solely on information the consumer had entered, or "preapprove" the consumer for a loan based on the consumer's consumer report, as well as the consumer-supplied information. To select the preapproval option, consumers were required to click a radio button next to the statement "Order my credit report and use it to preapprove me for a loan." According to the Complaint, by selecting this option, consumers were filing applications for preapproval of a loan.
For those consumers who requested preapproval, Quicken Loans obtained consumer reports from consumer reporting agencies and used the reports, along with consumer-supplied information, to evaluate the consumers' creditworthiness for any of its online loan products. For those consumers whom Quicken Loans preapproved for one of its online loan products, respondent provided an online preapproval letter containing the specific terms (e.g., loan amount, interest rate, points, and APR) of the loans for which the consumers were preapproved.
Those consumers whom respondent did not preapprove for one of its online loan products received an online advisory informing them that, "[b]ased on the information you have provided, it appears that you have unique borrowing needs." Quicken Loans invited these consumers to click a button reading "NEXT STEP" to permit a Quicken Loans loan consultant to contact them about other possible Quicken Loans loan options. The Commission's Complaint alleges that the message communicated through the advisory was that consumers' online applications for preapproval had been denied. As a result, many consumers who received this advisory left the website without submitting contact information. Consumers who received the "unique borrowing needs" advisory but did not then submit contact information online received no further contact from respondent. The Complaint alleges that, through the actions described above, Quicken Loans took adverse action with respect to consumers in some instances, based in whole or in part on information contained in consumer reports, but failed to provide the notice required by Section 615.
Part I of the proposed order requires that whenever Quicken Loans takes adverse action with respect to a consumer's application for credit, based either wholly or partly on information in a consumer report, Quicken Loans must provide the consumer with a notice that complies with Section 615(a). Part I also provides that the Commission would not view Quicken Loans' failure to grant an online request for preapproval as an adverse action if the company meets certain specific requirements, which include that (1) Quicken Loans provides a clear and conspicuous disclosure in close proximity to the preapproval offer that preapproval may be granted online or offline; and (2) if Quicken Loans determines it cannot grant preapproval online because it needs additional information, it will notify the consumer that (a) the request for preapproval has not been denied, but rather that Quicken Loans needs additional information from the consumer, and (b) if the consumer submits the additional information, Quicken Loans will determine whether to grant the request and communicate the decision to the consumer.
Parts II through VI of the proposed order are reporting and compliance provisions. Part II requires that Quicken Loans maintain and make available for Federal Trade Commission inspection and copying documents demonstrating compliance with Part I of the order. Part III requires dissemination of the order now and in the future to persons with responsibilities relating to the subject matter of the order. Part IV ensures notification to the FTC of changes in corporate status. Part V mandates compliance reports within sixty (60) days after service of the order and at such other times as the FTC may require. Part VI is a provision "sunsetting" the order after twenty (20) years, with certain exceptions.
The purpose of this analysis is to facilitate public comment on the proposed order, and is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.
This proposed order, if issued in final form, will resolve the claims alleged in the complaint against the named respondent. It is not the Commission's intent that acceptance of this consent agreement and issuance of a final decision and order will release any claims against any unnamed persons or entities associated with the conduct described in the complaint.