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From Banking and Finance Law Daily, January 17, 2014

Check authorization provider pays $3.5 million to settle FTC charges

By Lisa M. Goolik, J.D.

The Federal Trade Commission has announced that TeleCheck Services, Inc., one of the largest providers of check authorizations, along with its affiliated debt-collection entity, TRS Recovery Services, Inc., will pay $3.5 million to settle charges that they violated the Fair Credit Reporting Act and the FTC’s Furnisher Rule. TeleCheck and TRS have also agreed to alter their future business practices to comply with the requirements of the FCRA and the Furnisher Rule.

Allegations. According to the FTC’s complaint, TeleCheck is a consumer reporting agency based in Houston, Texas. TeleCheck provides recommendations to merchants as to whether to accept a consumer’s check based on the consumer’s identification provided at the point of sale, if the customer had previously returned checks, and a variety of other risk factors bearing on the likelihood that a check will be returned unpaid by the consumer’s financial institution. TeleCheck has processed 560 million transactions for over 400,000 subscribers, at more than 375,000 locations.

Based in Houston, Texas, TRS is a TeleCheck affiliate that handles consumer debt taken on by TeleCheck and furnishes information about consumers to TeleCheck.

Under the FCRA, consumers whose checks are denied based on information TeleCheck provided to the merchant have the right to dispute that information and have TeleCheck investigate and correct any inaccuracies. The FTC alleged that TeleCheck refused to investigate disputes and failed to reasonably assure the maximum possible accuracy of the information it provided to its merchant clients. TeleCheck also failed to promptly correct errors on consumers’ reports, the FTC alleged.

In addition, the FTC alleged that TRS violated the requirements of the FTC’s Furnisher Rule. The rule requires entities furnishing informaBanking and Finance Law Daily will be on a brief hiatus in commemoration of the Martin Luther King, Jr. holiday and will not be publishing on Monday, January 20. We will resume publication on Tuesday, January 21, with the extensive coverage you’ve come to expect.tion to CRAs to ensure the accuracy and integrity of the information provided.

Broader initiative. The FTC is targeting the practices of data brokers, which compile, maintain, and sell sensitive consumer information. The penalty matches the second-largest ever obtained by the FTC in an FCRA case. In August 2013, Certegy Check Services, Inc., another check authorization company, agreed to pay a $3.5 million fine to settle FTC allegations similar to those made against TeleCheck.

“If CRAs like TeleCheck provide merchants with inaccurate information, those merchants may wrongly deny consumers the ability to buy even the most essential items, like food and medicine. The FCRA gives consumers the right to dispute and correct inaccurate information,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The Commission takes violations of these rights seriously.”

Companies: Certegy Check Services, Inc.; TeleCheck Services, Inc.; TRS Recovery Services, Inc.

MainStory: TopStory EnforcementActions FairCreditReporting Privacy

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