Major Producer of Merged Credit Reports Agrees to Settle Charges of Violating Fair Credit Reporting Act;

Settlement Would Require Company to Investigate; Take Other Actions

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First American Real Estate Solutions, LLC ("FARES") has agreed to settle Federal Trade Commission charges that First American CREDCO ("CREDCO"), now a division of FARES, violated the Fair Credit Reporting Act ("FCRA") by, among other things, failing to investigate information disputed by consumers in certain credit reports -- known as instant merge reports -- prepared by CREDCO. FARES is based in St. Petersburg, Florida; CREDCO is based in San Diego, California.

Instant merge reports, produced by CREDCO and other consumer reporting agencies, blend consumer account information on individual consumers from at least two, and often all three, of the national credit bureaus, Trans Union, Equifax, and Experian. The market for these reports includes residential mortgage lenders, home equity lenders, automobile dealers, residential property managers, and others. Instant merge reports are produced and delivered electronically via computer to these end-users in a matter of seconds.

Under the FCRA, when a consumer disputes information in a consumer report (such as an instant merge report), the consumer reporting agency must investigate the disputed information and correct or delete the information if it is inaccurate. If after investigation, the consumer reporting agency chooses not to change the way it reports the information, it must include in future consumer reports a statement that the information is being disputed by the consumer and, if the consumer submits a statement describing the dispute, include that statement in subsequent consumer reports. The FCRA also requires consumer reporting agencies to follow reasonable procedures to prevent inaccurate or unverifiable information from appearing on subsequent consumer reports.

According to the FTC's complaint detailing the charges, CREDCO failed to comply with any of these requirements in connection with its instant merge reports. The complaint states that CREDCO typically did not investigate disputed information in its instant merge reports. Instead, CREDCO referred consumers with complaints to the national credit bureaus from which CREDCO received the disputed information. In addition, according to the FTC's complaint, on the rare occasions when CREDCO did investigate disputed information, the company did not correct or delete from its files the information found to be inaccurate or obsolete. The complaint alleges further that, when such investigations did not resolve a consumer's dispute and the consumer submitted a dispute statement, CREDCO neither indicated in future instant merge reports that the consumer disputed the information nor included the consumer's dispute statement in subsequent reports. Finally, the complaint alleges that, when CREDCO learned through investigations that certain instant merge report information was inaccurate, it did not prevent the information from reappearing in future reports.

The proposed consent agreement to settle the charges, announced today for a public comment period, would apply to all consumer reports that FARES creates, including its instant merge reports. The agreement would require FARES to investigate consumer report information that consumers dispute and then either record the current status of the information or delete it. In addition, within five business days after receiving a consumer dispute, FARES would have to notify the furnisher of the information that the information is being disputed. In addition, FARES would be required to maintain reasonable procedures to prevent the reappearance in a consumer's file, and in consumer reports on the consumer, of information that has been deleted. The agreement would also require FARES to notify a consumer, within five business days after it completes a reinvestigation, (a) that the consumer has the right to file a dispute statement, and (b) that the consumer has the right to request that FARES provide, to any person designated by the consumer who has received a consumer report with the disputed information within the prior two years, either a notice that the item has been corrected or deleted, or a copy of the consumer's dispute statement.

Finally, the proposed consent agreement contains a number of recordkeeping and reporting requirements designed to assist the Commission in monitoring FARES' compliance with the agreement.

Amendments to the FCRA became effective in September 1997. Because the practices of CREDCO that allegedly violated the FCRA occurred prior to September 1997, the complaint alleges violations of the pre-amendment FCRA only. The proposed agreement, however, requires FARES to comply with the amended FCRA as well as any future FCRA amendments.

The Commission vote to accept the proposed consent agreement for public comment was 4-0. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, the proposed consent agreement, an analysis of the agreement to assist with public comment, and the FTC's brochure explaining the FCRA are available from the FTC's web site at and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 952 3267)

Contact Information

Media Contact:
Howard Shapiro
Office of Public Affairs
Staff Contact:
David Medine or Thomas E. Kane
Division of Financial Practices