FTC settles complaints against credit report resellers

The U.S. Federal Trade Commission has approved proposed settlements of complaints against three credit report resellers after the agency accused them of lax cybersecurity practices that led to compromised credit reports.

The settlements, announced Thursday, require the credit report resellers to put comprehensive cybersecurity programs in place and to obtain independent audits of their cybersecurity programs every other year for 20 years. The settlements also require the businesses to give credit reports only to customers with legitimate purposes, the FTC said in a press release.

Insufficient security measures at the three companies resulted in hackers accessing more than 1,800 credit reports without authorization between October 2006 and June 2008, the FTC said. The three companies failed to take "reasonable efforts" to protect against future breaches, even after learning of the data breaches, the agency said.

More than 780 credit reports held by SettlementOne were compromised between February and June 2008, according to the FTC complaint against the company.

The three companies buy credit reports from three nationwide consumer reporting agencies and combine them into special reports sold to mortgage brokers and others to determine consumers' eligibility for credit.

The companies named in the administrative complaints were SettlementOne Credit and its parent company, Sackett National Holdings; ACRAnet; Fajilan and Associates, doing business as Statewide Credit Services; and founder Robert Fajilan.

None of the three companies immediately responded to e-mail requests asking for comment on the proposed settlements.

"These cases should send a strong message that companies giving their clients online access to sensitive consumer information must have reasonable procedures to secure it," David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement. "Had these three companies taken adequate steps to ensure the use of basic computer security measures, they might have foiled the hackers who wound up gaining access to extensive personal information in the consumer reporting system."

The FTC complaints charged them with violating the Fair Credit Reporting Act by failing to protect their websites and by giving credit reports to hackers when the companies had reasonable grounds to believe the reports would not be used for legal purposes.

The resellers allegedly violated the U.S. Gramm-Leach-Bliley Safeguards Rule by failing to design and implement information safeguards to control the risks to consumer information, and by failing to regularly monitor the effectiveness of their controls and procedures, the FTC added.

The proposed settlements will be open to public comment for 30 days.

The FTC 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. A complaint is not a finding that the respondents violated the law.

Violations of an FTC consent order following an administrative complaint can result in civil penalties of up to $16,000 per violation.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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