Credit Reporting Firm to Pay Fine in Data Accuracy Dispute
Consumer reporting agency Far West Credit Inc. in Salt Lake City will pay $120,000 to settle Federal Trade Commission charges that the company violated federal law when it did not follow reasonable procedures to assure the accuracy of the information in the consumer reports it sold to mortgage companies.
According to an FTC complaint, Far West Credit, which was acquired by LandAmerica Financial Group Inc. of Richmond, Va., in February 2004, creates consumer credit reports for use by the mortgage industry in evaluating consumers for loans. The company buys credit reports from the major credit reporting agencies - Equifax, TransUnion and Experian - and merges the information about the consumers.
If there is insufficient information about the consumer's credit worthiness from the agencies, the FTC said Far West Credit accepts information from the consumer or other interested parties to show consumers' credit status with businesses such as cable companies, utilities, "rent-to-own" businesses and insurance companies - operations that do not report normally to the nationwide credit bureaus.
The complaint, which was filed in U.S. District Court for the District of Utah, alleges that Far West provided consumer reports to Keystone Mortgage and Investment Co., a home lender. Keystone had an interest in making the loans and Keystone's employees provided documentation of borrowers' credit accounts to Far West to be used in creating consumer reports for those borrowers. The credit information provided by Keystone employees was not adequately verified by Far West, the FTC charges. In fact, documentation provided by Keystone for many of the consumers was false, the FTC said. For example, in many cases, Keystone documented accounts with utility and cable companies that did not even service the areas where the consumers lived, according to the complaint.
Keystone made mortgage loans based on the inaccurate consumer reports, according to the FTC, and the mortgages were insured by the Federal Housing Administration. Some of the mortgages have defaulted, resulting in losses to the FHA program.
The FTC charged Far West with violating the Fair Credit Reporting Act and the FTC Act. The settlement will require Far West to have in place reasonable procedures to assure the maximum possible accuracy of information in consumer reports that it prepares, and will require Far West to pay $120,000 in civil penalties. The settlement also contains certain record keeping and reporting requirements to allow the FTC to monitor compliance.
Lloyd Osgood, vice president of communications at LandAmerica, said Far West was acquired by LandAmerica after the violation had occurred. "As we incorporated that acquisition into our business, LandAmerica has taken steps to integrate Far West into our system of internal controls to prevent a similar situation from happening again."
Attempts to reach Keystone Mortgage were unsuccessful by press time last week.
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