Credit reporting company to pay $8 million penalty

The Consumer Financial Protection Bureau has announced it has taken action against a nationwide credit reporting company, Clarity Services, Inc., and its owner, Tim Ranney, for illegally obtaining consumer credit reports. The company also violated the law, reported the Bureau, by failing to appropriately investigate consumer disputes. The Bureau is ordering the company and its owner to halt their illegal practices and improve the way they investigate consumer disputes and obtain, sell, and resell consumer credit reports. The company and Ranney must also pay an $8 million penalty to the Bureau.

Clarity Services, Inc. is a Florida-based credit reporting company that focuses on the subprime market. The company compiles and sells credit reports to financial service providers, such as payday lenders. Clarity purchases credit reports from other credit reporting companies, supplements these reports with alternative data, and resells the repackaged reports to be used in underwriting decisions. Companies that purchase Clarity’s consumer reports are often lenders making small-dollar loans to consumers who have thin credit files. The Bureau found that Clarity violated the Fair Credit Reporting Act by illegally obtaining the consumer reports of tens of thousands of consumers—without a permissible purpose—for use in marketing materials for potential clients. The company also failed to investigate consumer disputes, including consumer disputes about unauthorized credit inquiries.