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CFPB Orders Subprime Credit Reporting Company, Owner to Pay $8M Penalty for Illegal Practices
Monday, December 7, 2015 6:40 AM

Company Mishandled Consumer Reports, Failed to Investigate Consumer Disputes

On Thursday, the Consumer Financial Protection Bureau took 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 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.

“Credit reporting plays a critical role in consumers’ financial lives,” said CFPB Director Richard Cordray. “Clarity and its owner mishandled important consumer information and failed to take appropriate action to investigate consumer disputes. Today, we are holding them accountable for cleaning up the way they do business.”

Clarity Services, Inc. is a Florida-based credit reporting company that focuses on the subprime market. Tim Ranney is the president, chief executive officer, and founder of the company. 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 Fair Credit Reporting Act requires that access to consumer reports be limited to those with a “permissible purpose,” such as a lender making an underwriting decision about a consumer. Among other things, this protection helps to ensure that consumer reports are obtained and used appropriately and that consumer privacy rights are protected. When a lender requests to pull a credit report for a permissible use, the inquiry often appears on the consumer’s credit file.

The CFPB found that Clarity and Ranney 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. The specific violations include:

  • Illegally obtaining consumer reports without permission.
  • Failing to investigate consumer credit reporting disputes.

Enforcement Action

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions and individuals who violate the Fair Credit Reporting Act. Under the terms of the administrative order, Clarity and Ranney will be required to:

  • End illegal credit reporting practices.
  • Improve consumer safeguards.
  • Fully investigate consumer disputes.
  • Pay a civil monetary penalty of $8 million.

View the CFPB order.