J.C. Penney, one of the largest retail stores in the country, has agreed to pay a $225,000 civil penalty to settle Federal Trade Commission charges that it violated consumers' rights to receive written notice of the reasons for a denial of credit. The FTC alleged that when J.C. Penney denied consumers' credit applications, it either failed to explain the reasons at all, or gave the wrong reasons. Under the proposed settlement, in addition to paying the civil penalty, Penney would be required to give consumers who were denied credit in the past a written statement of the correct reasons for denial, and to comply with federal laws requiring such explanation in the future.
J.C. Penney is headquartered in Dallas, Texas.
"When a creditor such as J.C. Penney fails to provide this information, it is denying millions of consumers their right to learn how the credit approval process works, and their chance to improve their credit record," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.
The credit denial notices are required by the Equal Credit Opportunity Act (ECOA) and its implementing Regulation B, both enacted by Congress on Oct. 28, 1974. Regulation B requires that when "adverse action" is taken, creditors provide applicants in writing with either a statement of specific reasons for the action taken, or a disclosure of the applicant's right to such a statement within 30 days, if the statement is requested within 60 days of the creditor's notification. Regulation B also requires that the statement be "specific and indicate the principal reasons for the adverse action." The ECOA prohibits a creditor from discriminating against an applicant for credit based on race, color, religion, national origin, sex, marital status or age, receipt of public assistance, or the applicant's exercise of his or her rights under the Consumer Credit Protection Act.
According to the FTC's complaint detailing the charges, when evaluating consumers' applications for The JC Penney Card or an increase in their line of credit, Penney's violated the ECOA and Regulation B by:
- failing to provide many denied applicants with a written statement of the specific reasons for the denial, or with notice of their right to receive such a statement;
- providing inaccurate reasons for the denial on notices it did send out; and
- failing to provide applicants who were orally denied requests for a credit line increase with a written statement of the reasons for the denial or of their right to such a statement.
To settle the FTC charges, J.C. Penney would be required to pay the $225,000 civil penalty within five days, and would be prohibited from engaging in future violations of the ECOA or Regulation B. In addition, the settlement would require J.C. Penney to send consumers denied credit notices stating the actual reasons for the denials, or that the consumers have a right to such statement. These notices would have to be mailed to all credit applicants denied a J.C. Penney credit card on or after Jan. 1, 1995, or orally denied an increase in their credit line on or after June 1, 1995, and who did not already receive the required notice.
The settlement also contains various reporting and recordkeeping requirements that would assist the FTC in monitoring J.C. Penney's compliance.
The FTC's New York Regional office handled the case.
The Commission vote to authorize the filing of the complaint and proposed consent decree was 5-0. The proposed consent decree settling the FTC charges requires the court's approval to become binding. The complaint and consent decree were filed on September 24, 1996, in the U.S. District Court for the Eastern District of New York, in Brooklyn, by the U.S. Attorney and the Department of Justice at the request of the FTC.
NOTE: This consent decree is for settlement purposes only and does not constitute admission of a law violation. A consent decree has the force of law when signed by the judge.
Copies of complaint and proposed consent decree 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 for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov
(FTC File No. 942 3224)
(Civil Action No. CV-96-4696)
Brenda A. Mack,
Office of Public Affairs
Michael J. Bloom or Carole Paynter
New York Regional Office
150 William Street, 13th Floor
New York, New York 10038
212-264-1207 or 212-264-1225