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FTC Updates Telemarketer Fees for the Do Not Call Registry as of October 1, 2013

The Federal Trade Commission has announced updated fees starting on October 1, 2013, for telemarketers accessing phone numbers on the National Do Not Call Registry.

All telemarketers calling consumers in the United States are required to download the numbers on the Do Not Call Registry to ensure they do not call those who have registered their phone numbers. The first five area codes are free, and organizations that are exempt from the Do Not Call rules, such as some charitable organizations, may obtain the entire list for free. Telemarketers must subscribe each year for access to the Registry numbers.

The access fees for the Registry are being increased as required by the Do‑Not‑Call Registry Fee Extension Act of 2007. Under the Act’s provisions, in fiscal year 2014 (from October 1, 2013 to September 30, 2014), telemarketers will pay $59, an increase of $1, for access to Registry phone numbers in a single area code, up to a maximum charge of $16,228 for all area codes nationwide, an increase from the previous maximum of $15,962. Telemarketers will pay $1 more per area code for numbers they subscribe to receive during the second half of the 12‑month subscription period, for a total of $30 per area code.

For consumers who want to add their phone number to the Registry, registration is free and does not expire.

The Commission vote authorizing publication of the Federal Register notice announcing the new fees was 4-0. (FTC File No. P034305; the staff contact is Ami Dziekan, Bureau of Consumer Protection, 202‑326‑2648)

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Approves Final Order Settling Charges that General Electric’s Acquisition of Avio Aviation’s Business Would be Anticompetitive in Market for Airbus’s A320neo Aircraft Engines

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that General Electric Company’s acquisition of the aviation business of Italy’s Avio S.p.A would be anticompetitive. The FTC’s complaint alleges that GE’s acquisition of Avio would substantially lessen competition, giving GE the ability and incentive to disrupt the design and certification of Avio’s accessory gearbox, or AGB, a critical component in Pratt & Whitney’s PW1100G engine. GE — through CFM International, its joint venture with France’s Snecma S.A. — and Pratt & Whitney are the only two firms that manufacture engines used on Airbus’s A320neo aircraft.

The settlement with the FTC, first announced in July 2013, prevents GE from interfering with Avio’s development of the AGB for the PW1100G engine, or accessing Pratt & Whitney’s proprietary information about the AGB that is shared with Avio.

The Commission vote approving the final order was 3-0-1, with Commissioner Joshua D. Wright not participating. (FTC File No. 131-0069; the staff contact is Stephen W. Rodger, Bureau of Competition, 202-326-3643; see press release dated July 19, 2013)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Returns Additional $950,000 to Consumer Victims in DVD Vending Scam

The Federal Trade Commission is mailing 426 refund checks totaling more than $950,000 to consumers who were victimized by a scam that promoted video rental machines as a business opportunity. This mailing, combined with checks previously mailed by the FTC, will increase the total funds returned to consumers by the FTC in this matter to nearly $4 million.

The additional funds are a result of the FTC’s court victory in a collection action against the estate of the tenth and final defendant, Anthony Andreoni. The FTC is continuing to liquidate assets awarded in this case so that additional funds may be returned to injured consumers in the future.

The FTC alleged in its case against American Entertainment Distributors, Inc., that the defendants – five companies and five individuals – deceived consumers into paying $28,000 to $37,500 apiece for video rental vending machines by telling them they could expect to earn between $60,000 and $80,000 a year, or recoup their initial investment in six to 14 months. In fact, according to the FTC, the defendants had no reasonable basis for their claims and all investors lost money.

The refund amounts will vary depending on the amount lost by each consumer; over 400 refund checks will be for more than $1,000. The checks will be mailed by an administrator working for the FTC on August 30, 2013, and must be cashed on or before October 29, 2013. Consumers who have questions, or who have not yet filed a claim with the FTC and wish to do so, should call the Redress Administrator, Gilardi & Co. LLC, toll free, at 1-866-271-9147.

Remember: The FTC never requires consumers to pay money or provide information before redress checks can be cashed. Consumers should carefully evaluate claims about business opportunities. For more information see: Going into Business.

FTC Files Complaint Against LabMD for Failing to Protect Consumers’ Privacy

The Federal Trade Commission filed a complaint against medical testing laboratory LabMD, Inc. alleging that the company failed to reasonably protect the security of consumers’ personal data, including medical information. The complaint alleges that in two separate incidents, LabMD collectively exposed the personal information of approximately 10,000 consumers.

The complaint alleges that LabMD billing information for over 9,000 consumers was found on a peer-to-peer (P2P) file-sharing network and then, in 2012, LabMD documents containing sensitive personal information of at least 500 consumers were found in the hands of identity thieves.

The case is part of an ongoing effort by the Commission to ensure that companies take reasonable and appropriate measures to protect consumers’ personal data.

LabMD conducts laboratory tests on samples that physicians obtain from consumers and then provide to the company for testing. The company, which is based in Atlanta, performs medical testing for consumers around the country. The Commission’s complaint alleges that LabMD failed to take reasonable and appropriate measures to prevent unauthorized disclosure of sensitive consumer data – including health information – it held. Among other things, the complaint alleges that the company:

did not implement or maintain a comprehensive data security program to protect this information;
did not use readily available measures to identify commonly known or reasonably foreseeable security risks and vulnerabilities to this information;
did not use adequate measures to prevent employees from accessing personal information not needed to perform their jobs;
did not adequately train employees on basic security practices; and
did not use readily available measures to prevent and detect unauthorized access to personal information.

The complaint alleges that a LabMD spreadsheet containing insurance billing information was found on a P2P network. The spreadsheet contained sensitive personal information for more than 9,000 consumers, including names, Social Security numbers, dates of birth, health insurance provider information, and standardized medical treatment codes. Misuse of such information can lead to identity theft and medical identity theft, and can also harm consumers by revealing private medical information.

P2P software is commonly used to share music, videos, and other materials with other users of compatible software. The software allows users to choose files to make available to others, but also creates a significant security risk that files with sensitive data will be inadvertently shared. Once a file has been made available on a P2P network and downloaded by another user, it can be shared by that user across the network even if the original source of the file is no longer connected.

“The unauthorized exposure of consumers’ personal data puts them at risk,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to ensuring that firms who collect that data use reasonable and appropriate security measures to prevent it from falling into the hands of identity thieves and other unauthorized users.”

The complaint also alleges that in 2012 the Sacramento, California Police Department found LabMD documents in the possession of identity thieves. These documents contained personal information, including names, Social Security numbers, and in some instances, bank account information, of at least 500 consumers. The complaint alleges that a number of these Social Security numbers are being or have been used by more than one person with different names, which may be an indicator of identity theft.

The complaint includes a proposed order against LabMD that would prevent future violations of law by requiring the company to implement a comprehensive information security program, and have that program evaluated every two years by an independent, certified security professional for the next 20 years. The order would also require the company to provide notice to consumers whose information LabMD has reason to believe was or could have been accessible to unauthorized persons and to consumers’ health insurance companies.

The Commission vote to issue the administrative complaint and notice order was 4-0.

Because LabMD has, in the course of the Commission’s investigation, broadly asserted that documents provided to the Commission contain confidential business information, the Commission is not publicly releasing its complaint until the process for resolving any claims of confidentiality is completed and items in the complaint deemed confidential, if any, are redacted.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

FTC Signs Memorandum of Understanding with Nigerian Consumer Protection and Criminal Enforcement Authorities

The Federal Trade Commission signed a memorandum of understanding (MOU) with two Nigerian agenciestoday to increase cooperation and communication in their joint efforts to stamp out cross-border fraud. Nigeria’s Ambassador to the United States, Ambassador Adebowale Adefuye, provided opening remarks for the MOU signing ceremony.

The MOU was signed by FTC Chairwoman Edith Ramirez; Director General Dupe Atoki, of Nigeria’s Consumer Protection Council (CPC); and Executive Chairman Ibrahim Lamorde, of Nigeria’s Economic and Financial Crimes Commission (EFCC). It is the first FTC MOU of this kind to include a foreign criminal enforcement authority. The CPC addresses consumer complaints through investigations and enforcement; the EFCC is a criminal enforcement agency with authority to address consumer fraud and other financial crimes.

“Cross-border scammers use fraudulent e-mails and other scams to bilk consumers all over the world, while undermining confidence in legitimate businesses,” said FTC Chairwoman Ramirez. “This MOU will help our agencies better protect consumers in both the U.S. and Nigeria.”

Director Atoki stated that “We fully support this collaboration on consumer and fraud matters, and have already detailed a senior CPC official to the FTC for a six-month staff exchange.” And Executive Chairman Lamorde noted that he “welcomes this partnership, which builds on our existing collaboration with the FTC and with U.S. criminal enforcement authorities.”
The MOU provides for a Joint Implementation Committee to identify concrete areas of collaboration, establish joint training programs and workshops, and provide assistance regarding specific cases and investigations. The MOU is a framework for voluntary cooperation and will not change existing laws in either country.

The FTC has already worked with the two Nigerian agencies on policy and enforcement matters in various fora, including the African Consumer Protection Dialogue, the International Mass Marketing Fraud Working Group, the London Action Plan (LAP, an anti-spam network), and the International Consumer Protection and Enforcement Network.

The Commission vote authorizing Chairwoman Ramirez to sign the MOU on behalf of the agency was 4-0.

As more U.S. companies and consumers do business overseas, more FTC work involves international cooperation. The Office of International Affairs serves both as an internal resource to Commission staff on international aspects of their work and as an official representative to numerous international organizations. In addition, the FTC cooperates with foreign authorities through formal and informal agreements. The FTC works with more than 100 foreign competition and consumer protection authorities around the world to promote sound policy approaches. For questions about the Office of International Affairs, send an e-mail to [email protected]. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases and the FTC International Monthly for the latest FTC news and resources.

Hospital Authority and Phoebe Putney Health System Settle FTC Charges That Acquisition of Palmyra Park Hospital Violated U.S. Antitrust Laws

The Hospital Authority of Albany-Dougherty County andPhoebe Putney Health System, Inc. have agreed to settle Federal Trade Commission charges that the acquisition ofPalmyra Park Hospital harmed hospital competition in six Georgia counties. The proposed consent includes provisions to aid competition in these local health care markets, but due to the unique circumstances of the Certificate of Need (CON) laws in Georgia, the Commission is unable to require that the hospitals become independent competitors.

Divestiture, the Commission’s preferred remedy to restore competition lost due to an illegal merger, would trigger CON review. Unfortunately, Albany is deemed “over-bedded” by Georgia’s strict need assessment criteria making it unlikely that any possible divestiture buyer could obtain the necessary CON approval to operate an independent hospital. Under the proposed consent order, the Hospital Authority and Phoebe Putney will be required to give the FTC prior notice of future transactions, and will be barred from opposing certain applications by potential competitors seeking state certification to enter local health care markets.

“The FTC’s efforts in this case produced a tremendous victory for consumers when the Supreme Court unanimously reined in overbroad application of state action immunity and allowed federal antitrust review of this merger,” said Deborah Feinstein, Director of the FTC’s Bureau of Competition. “Regrettably, that legal victory will not undo the acquisition’s clear harm to competition. Because divestiture is unavailable in light of Georgia’s strict certificate of need legislation, this proposed order is the most effective and efficient resolution that can be achieved at this time.”

The Complaint. The FTC’s administrative complaint, issued on April 20, 2011, alleged that the acquisition of Palmyra Park by the Hospital Authority and Phoebe Putney was essentially a merger to monopoly and would allow Phoebe Putney to raise prices for general acute-care hospital services charged to commercial health plans, as well as diminish healthcare quality and service, substantially harming patients and local employers and employees. The complaint also alleged that Phoebe Putney was the main driver of the acquisition, having intentionally structured the deal in a way that involved the Hospital Authority as a “straw man” to shield the anticompetitive acquisition from federal antitrust scrutiny under the state action doctrine. The state action doctrine immunizes from antitrust enforcement conduct that qualifies as an act of state government.

In July 2011, the FTC stayed the administrative case pending resolution of federal court litigation regarding the applicability of state action immunity to the proposed acquisition. Ultimately, the Eleventh Circuit U.S. Court of Appeals ruled that state action immunity prevented federal antitrust review of the acquisition. Following the decision, the parties consummated the acquisition on December 15, 2011. Thereafter, the FTC sought and obtained certiorari from the U.S. Supreme Court, which issued a unanimous ruling in the FTC’s favor on February 19, 2013, holding that the acquisition was not subject to state action immunity. The Supreme Court’s ruling clarifies the test for determining when state action immunity applies to anticompetitive actions by non-sovereign state actors, such as the Hospital Authority in this case. The ruling has broad implications for antitrust enforcement in a variety of industries and contexts.

On March 14, 2013, the Commission lifted its stay of administrative litigation and ordered a new date for trial before Chief Administrative Law Judge D. Michael Chappell.

The Proposed Settlement Order. The Commission’s order does not require the divestiture of a hospital or other assets involved in the transaction because, even if the transaction were ruled anticompetitive after a full trial on the merits, it would not be feasible to restore the competition that was lost due to the legal and practical challenges presented by Georgia’s CON laws and regulations. More information about Georgia’s CON laws and their implications in this case can be found in the analysis to aid public comment for this matter.

The proposed consent order announced today is designed to address through the most effective means available the FTC’s competitive concerns regarding the acquisition of Palmyra by the Hospital Authority and Phoebe Putney. Its terms are acceptable to the Commission only under the unique circumstances present here, in particular the unavailability of divestiture or other structural relief. Specifically, the order:

requires the Hospital Authority and Phoebe Putney to give the Commission prior notice of any future transactions involving not only hospitals in the affected counties, but also other healthcare providers such as inpatient and outpatient facilities or physician practice groups. Prior notice will allow the Commission to take steps to prevent potential anticompetitive effects of any future acquisitions before they are consummated, and
prohibits the Hospital Authority and Phoebe Putney from opposing a CON application for a general acute-care hospital in the six-county area. CON laws can act as a barrier to entry; the order provision ensures that the Hospital Authority and Phoebe Putney cannot impose additional costs on potential entrants by raising objections or filing negative comments in opposition to a pending application.

The order notes that the Hospital Authority and Phoebe Putney have stipulated that the effect of the consummated transaction may be substantially to lessen competition within the relevant service and geographic markets alleged in the Complaint.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 3-0-1, with Commissioner Joshua D. Wright not participating. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through September 23, 2013, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments also can be submitted electronically.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $16,000.

Precious Metal Marketers Agree to Settle FTC Charges

Telemarketers behind an allegedly fraudulent investment scheme used to con nearly $5 million from elderly consumers have been banned from selling precious metals under a settlement with the Federal Trade Commission.

The settlement resolves FTC charges against Sterling Precious Metals LLC, Matthew Meyer and Francis Ryan Zofay for promising consumers they could profit by investing in precious metals with little risk of loss, without telling them they probably would have to pay more money later or lose their investment.

In addition to banning the defendants from selling precious metals, the settlement order permanently prohibits them from misrepresenting material facts about any products and services, selling or otherwise benefitting from consumers’ personal information, failing to properly dispose of customer information, and failing to provide consumer information to the FTC so it can administer consumer redress. The order also requires them to record all of their telemarketing calls for seven years.

The order imposes a judgment of more than $4.7 million against Meyer and Zofay, which will be partially suspended based on their ability to pay and the surrender of Meyer’s leased cars, a 2013 Bentley Continental and a 2012 Land Rover. The full judgment will become due immediately if they are found to have misrepresented their financial condition. The Commission will also seek to dismiss Kerry Marshall as a defendant.

For consumers considering investing in precious metals, the FTC offers advice, including Investing in Gold, Investing in Bullion and Bullion Coins, and Investing in Collectible Coins.

The Commission vote authorizing the staff to file the proposed consent judgment and amended complaint was 4-0. The consent judgment was entered by the U.S. District Court for the Southern District of Florida on August 22, 2013.

NOTE: Consent judgments have the force of law when approved and signed by the District Court judge.

Jesta Digital Settles FTC Complaint it Crammed Charges on Consumers’ Mobile Bills Through ‘Scareware’ and Misuse of Novel Billing Method

Global mobile marketer Jesta Digital, LLC, will provide refunds to a large number of consumers and pay an additional $1.2 million to the Federal Trade Commission as part of a settlement with the FTC, which alleged that Jesta crammed unwanted charges onto consumers’ cell phone bills.

According to the Commission’s complaint, Jesta – which also does business as Jamster – ran phony virus-scan ads on consumers’ Android mobile devices while they played the Angry Birds mobile app. The ads falsely claimed that a virus was detected on the consumer’s mobile device. The ads incorporated an image of a robot designed to look similar to the Android operating system’s robot logo:

Example mobile app ads falsely claiming that a virus was detected on the consumer’s mobile device, one saying “Virus detected”, another saying “You have 20 viruses”.

When consumers clicked on the ads, Jesta presented them with a series of screens or landing pages that included bold and prominent language and visuals about protecting Android mobile devices from viruses. While a screen contained a subscriber button, the FTC alleged that if consumers clicked anywhere on the screens or landing pages, Jesta charged them $9.99 per month directly on their mobile bill for ringtones and other mobile content. If consumers actually attempted to subscribe and download Jesta’s so-called anti-virus software to their mobile devices, the download often failed, according to the FTC complaint. Jesta’s internal emails quoted in the FTC’s complaint are particularly illustrative. In one email, a Jesta official was “anxious to move [Jesta’s] business out of being a scam and more into a valued service.”

Jesta charged unsuspecting consumers by misusing a novel, little-used billing method known as Wireless Access Protocol, or WAP, billing. WAP billing captures a consumer’s mobile phone number from the mobile device, which is used to place charges on their mobile phone bill without the need to obtain the information manually from the consumer.

Under the terms of the proposed settlement, Jesta is prohibited from making deceptive statements about viruses and anti-virus software, the cost of goods or services, or the conditions of a purchase. Jesta must also receive express verifiable authorization from a consumer before placing any charges on a consumer’s mobile phone bill.

Jesta is required to automatically provide full refunds to consumers who were billed between Dec. 8, 2011, and the date of entry of the order for any good or service that involved the company claiming the consumer’s device was infected with malware or that the Jesta would provide purchasers with software to protect their mobile device from malware.

For those consumers Jesta charged between Aug. 1 and Dec. 7, 2011, under short code 75555 (which includes the marketing campaign challenged in the complaint), Jesta is required to notify those consumers of their ability to obtain a refund. Consumers will have to contact Jesta at 866-856-5267 or by e-mail at [email protected] and make a refund request. Jesta is obligated to pay a refund to consumers who did not use the service offered by Jesta or where the charges were incurred by a child under the age of 18.

In addition to providing timely refunds directly to consumers, Jesta will pay $1.2 million directly to the Commission.

Consumers with questions about the case or the refund process may contact the FTC for more information at 202-326-3523.

This complaint marks the Commission’s second mobile cramming case and the first involving WAP billing and scareware brought by the Commission. Earlier this year, the FTC also held a roundtable that explored the most effective ways to protect consumers from mobile cramming.

The Commission vote authorizing the staff to file the complaint and approving the proposed stipulated final order was 4-0. The FTC filed the complaint and proposed order in the U.S. District Court for the District of Columbia. The proposed order is subject to court approval.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

CONSUMER HOTLINE: 202-326-3523

FTC Submits Proposed Amicus Brief Concerning “No-Authorized-Generic” Commitments in Drug Companies’ Patent Settlements

The Federal Trade Commission has asked the U.S. District Court for the District of New Jersey to accept an amicus brief that addresses the application of the U.S. Supreme Court’s recent ruling in FTC v. Actavis to a patent settlement containing a “no-authorized-generic” commitment. The FTC submitted the brief in the case of In re Effexor XR Antitrust Litigation.

An authorized generic is chemically identical to its counterpart brand-name drug, but sold by the brand company or its representative as a generic product under the same regulatory approval as the brand-name drug. A no-authorized-generic commitment means that the brand-name drug firm, as part of a patent settlement, agrees that it will not launch its own authorized-generic alternative when the first generic company begins to compete. An FTC empirical study of the competitive effects of authorized generics found that when a brand company does not launch an authorized generic during the exclusivity period reserved for the first-filing generic under the Hatch-Waxman Act, it substantially increases the first generic company’s revenues, and consumers pay higher prices for the generic product.

In Actavis, the Supreme Court held that “reverse-payment” patent settlements – agreements in which a brand-name drug manufacturer pays a would-be competitor to abandon its patent challenge and agrees not to sell its generic drug product for a number of years – are not immune from antitrust scrutiny and are to be evaluated using traditional antitrust factors.

The plaintiffs in the Effexor XR case have challenged a patent settlement agreement between drug manufacturers Wyeth and Teva Pharmaceuticals, alleging that Teva agreed to delay introduction of its generic version of Wyeth’s blockbuster antidepressant drug Effexor XR until July 1, 2010, and Wyeth agreed not to market an authorized generic version of Effexor XR for a period of time. The defendants have argued that the antitrust analysis required by Actavis does not apply to this agreement, because the agreement did not involve a cash payment.

The FTC’s amicus brief states that the Effexor XR case presents “an issue with significant implications for American consumers”: whether pharmaceutical patent settlements are “immune from antitrust scrutiny so long as the brand-name drug manufacturer pays for delayed entry with something other than cash.” The brief explains why “[t]he allegations here raise the same type of antitrust concern that the Supreme Court identified in Actavis,” and thus should be treated in the same fashion. The Supreme Court’s opinion speaks in terms of “payments” and “money,” not because cash has a unique economic effect, but because Actavis involved allegations of cash payments. But, the brief points out, “accepting the defendants’ claim of immunity whenever patentees use vehicles other than cash to share the profits from an agreement to avoid competition elevates form over substance, and it would allow drug companies to easily circumvent the ruling in Actavis, at great cost to consumers.”

The Commission vote approving the amicus brief filing was 4-0. The filing was submitted to the court on August 14, 2013, and a ruling on the FTC’s request to participate as amicus is expected by mid-September.

Certegy Check Services to Pay $3.5 Million for Alleged Violations of the Fair Credit Reporting Act and Furnisher Rule

Certegy Check Services, Inc., one of the nation’s largest check authorization service companies, has agreed to pay $3.5 million to settle Federal Trade Commission charges that it violated the Fair Credit Reporting Act (FCRA).

Certegy, based in St. Petersburg, Fla., is a consumer reporting agency (CRA) that compiles consumers’ personal information and uses it to help retail merchants throughout the United States determine whether to accept consumers’ checks. Under the FCRA, consumers whose checks are denied based on information Certegy provides the merchant, have the right to dispute that information and have Certegy correct any inaccuracies.

The FTC’s complaint alleges, among other things, that Certegy did not follow proper dispute procedures. The complaint further alleges that Certegy failed to follow reasonable procedures to assure maximum possible accuracy of the information it provided to its merchant clients, as required by the FCRA.

Among other things, the settlement requires Certegy to make improvements in these areas. This case is part of a broader initiative to target the practices of data brokers, which often compile, maintain, and sell sensitive consumer information. Consumer reporting agencies like Certegy are data brokers that sell information to companies making important decisions about consumers, such as their ability to get credit or pay for goods and services by check.

“Inaccurate information in a consumer reporting agency’s file can have a huge impact on a person’s everyday life, starting with their check being denied at the grocery store,” said Jessica L. Rich, Director of FTC’s Bureau of Consumer Protection. “In this case, we alleged that Certegy delivered a one-two punch: the company not only failed to assure that the information it provided to retailers was accurate, but it also failed to follow proper dispute procedures. Today’s settlement will benefit consumers who use checks to pay for essential goods and services, including many older consumers and people without alternate means of payment, such as credit cards.”

In addition to the allegations described above, the complaint alleges that Certegy violated the FCRA by failing to create a streamlined process for consumers to obtain free annual reports that they are entitled to; and establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information it furnishes to other CRAs. This is the first Commission action alleging violations of the Furnisher Rule, which went into effect on July 1, 2010. The settlement requires Certegy to comply with the Furnisher Rule, as well as the requirement to maintain a streamlined process so that consumers can request their free annual reports.

Information for Business

The FTC has information for businesses on the Furnisher Rule, which can be found on the Commission’s website. Information regarding what businesses should know about consumer reports also is available.

The Commission vote approving the referral of the complaint to the Department of Justice and consent in settlement of the court action was 4-0. The complaint and proposed consent were filed in the U.S. District Court for the District of Columbia on August 15, 2013, against Certegy Check Services, Inc. The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistantor call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

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