February 2012

Identity theft again tops FTC’s top complaints list for 2011

Identity theft again tops FTC’s top complaints list for 2011

The Federal Trade Commission (FTC) on February 27, 2012 released its list of top consumer complaints received by the agency in 2011. For the twelfth year in a row, identity theft topped the list at 279,156 complaints or 15%. The breakdown for the next nine complaint categories (from a list of 30) is as follows:

Category	Number	Percentage
Debt collection	180,928	10
Prizes, sweepstakes, and lotteries	100,208	6
Shop-at-home and catalog sales	98,306	5
Banks and lenders	89,341	5
Internet services	81,805	5
Automobile-related	77,435	4
Imposter scams	73,281	4
Telephone and mobile services	70,024	4
Advance-fee loans and credit protection/repair	47,414	3

The FTC records the complaints in its Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. Other federal and state law enforcement including the U.S. Postal Inspection Service, the Department of Justice’s Internet Crime Complaint Center, and the attorneys general offices of Idaho, Michigan, Mississippi, North Carolina, Ohio, Oregon, Tennessee, and Washington also contribute to the database content, along with private-sector organizations such as U.S. and Canadian members of the Better Business Bureau, Western Union and Moneygram, and the Lawyers Committee for Civil Rights Under Law.

|Criminal Activity, Educational Series|

CFPB proposal would put larger debt collectors and credit reporting agencies under the same supervision process as banks

The Consumer Financial Protection Bureau (CFPB) on February 16, 2011 announced a
proposed rule to include debt collectors and consumer reporting agencies under its nonbank
supervision program.

Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is
authorized to supervise nonbanks in the specific markets of residential mortgage, payday
lending, and private education lending. For other nonbank markets of consumer financial
products or services, the CFPB must define “larger participants” by rule, which is due on
July 21, 2012.

Three types of debt collection agencies dominate the market: firms that collect debt owned
by another company for a fee, firms that buy debt and collect the proceeds for themselves,
and attorneys and law firms that collect debt through litigation. A single company may be
collecting through any or all of these activities. Under the proposed rule, debt collectors
with more than $10 million in annual receipts from collection activities would be subject to
supervision. The CFPB estimates that the proposed rule would cover approximately 175 debt
collection firms (or 4% of debt collection firms) which account for 63% of annual receipts
from the debt collection market.

The CFPB’s proposal also takes aim at the largest credit bureaus selling comprehensive
consumer reports, consumer report resellers, and specialty consumer reporting agencies.
Defined as companies that make more than $7 million annually from their consumer
business, the rule would affect 30 companies, and firms like Experian, TransUnion and
Equifax, that account for 94% of the industry’s business.

This is the CFPB’s first in a series of rulemakings to define larger participants. The CFPB
chose annual receipts as the criterion for both debt collection and consumer reporting
because it approximates participation in these two markets.

The proposed rule is open for comment for 60 days after the rule is published in the Federal
Register.

|Dodd-Frank|

Mobile apps may violate Fair Credit Reporting Act

On February 6, 2012, the Federal Trade Commission (FTC) issued warning letters to the marketers of six mobile applications that provide background screening apps that they may be violating the Fair Credit Reporting Act (FCRA.) The FTC said that if the background reports are being used for employment or other FCRA purposes, then the marketers and their clients must comply with the FCRA.

According to the warning letters, the FTC has not made a determination whether the companies indeed are violating the FCRA, but encourages them to review their apps, and their related policies and procedures. The FCRA is designed to protect the privacy of consumer report information and ensure that the information provided by consumer reporting agencies is accurate. Consumer reports are communications that include information about an individual’s character, reputation, or personal characteristics, and are used or expected to be used for purposes such as employment, housing or credit.

Under the FCRA, entities/operations that assemble or evaluate information to provide to third parties qualify as consumer reporting agencies (CRAs.) Mobile apps that supply such information also may qualify as CRAs under the Act. CRAs must take reasonable measures to ensure the user of each report has a ‘permissible purpose’ to use the report, take reasonable steps to ensure the maximum possible accuracy of the information conveyed in the report, and provide users of its reports with information about their obligations under the FCRA. In employment-purpose consumer reports, for example, CRAs must provide employers with information regarding their obligation to give notice to employees and applicants of any adverse action taken on the basis of a consumer report.