In the second-largest settlement negotiated by the agency under the Fair Credit Reporting Act, the Federal Trade Commission reached a deal with Certegy Check Services for $3.5 million based on allegations that the company failed to follow the correct dispute procedures under the Act.

Florida-based Certegy – one of the largest check authorization service providers in the country – compiles information about consumers to help merchants decide whether to accept their checks. But according to the FTC, Certegy failed to follow reasonable procedures to “assure maximum possible accuracy” of the information provided to retailers and then exacerbated the problem by not following the appropriate dispute procedures required by the FCRA.

Specifically, the defendant failed to timely investigate consumer disputes and follow up by deleting inaccurate, incomplete, or unverifiable information. The company also lacked a streamlined process so that consumers could get a free copy of Certegy’s report on them, the agency said.

According to FTC, instead of investigating information disputed by consumers, the defendant passed the responsibility off to the consumer. According to the complaint, “If a consumer disputes that he has a returned check from a particular merchant, Certegy requires the consumer to contract the merchant himself to resolve the dispute,” and “When the decline is a result of an ‘invalid’ ID, Certegy requires that the consumer obtain and send driving records to Certegy to ‘prevent future declines." 

The suit was also the first filed by the agency under the Furnisher Rule, which took effect July 1, 2010.

Pursuant to the terms of the settlement, Certegy is banned from future violations of the FCRA and must pay $3.5 million to the agency. The company also agreed to change its practices. It would henceforth no longer require that consumers contact third parties to resolve disputes and it agreed to provide consumers with copies of their reports within 15 days after receipt of a request.

To read the complaint and the stipulated final judgment in U.S. v. Certegy Check Services, click here.

Why it matters: The agency said the case against Certegy is part of a broader initiative targeting data brokers. “Inaccurate information in a consumer reporting agency’s file can have a huge impact on a person’s everyday life, starting with their check being denied at the grocery store,”  Jessica L. Rich, director of the FTC’s Bureau of Consumer Protection, said in a press release about the suit. “In this case, we alleged that Certegy delivered a one-two punch: the company not only failed to assure that the information it provided to retailers was accurate, but it also failed to follow proper dispute procedures. Today’s settlement will benefit consumers who use checks to pay for essential goods and services, including many older consumers and people without alternate means of payment, such as credit cards."