CFPB Cracks Down On Subprime Credit Reporting

The CFPB is cracking down on the subprime credit reporting industry.

Yesterday (Dec. 3), the CFPB took action against Clarity Services, Inc. and its owner and CEO, Tim Ranney, for allegedly illegally obtaining consumer credit reports. The bureau also reported that the company failed to investigate consumer disputes in a proper manner.

As a result, the company must halt these practices and find a way to remediate the situation by enhancing the ways it handles consumer disputes and obtains, sells and resells consumer credit reports. The company and its owner were also ordered to 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.”

The CFPB's ruling determined 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," according to its report.

The Fair Credit Reporting Act requires that access to consumer reports be limited to those with a “permissible purpose,” according to the CFPB. This protection ensures that consumer reports are obtained and used appropriately and that consumer privacy rights are protected. As part of the Dodd-Frank Act, the CFPB has the authority to take action against institutions and individuals who violate the Fair Credit Reporting Act.

Clarity Services, Inc., a Florida-based credit reporting company, focuses on the subprime market. The company compiles and sells credit reports to financial services 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.

Under the terms of this administrative order, Clarity and Ranney will be required to end illegal credit reporting practices, improve consumer safeguards and fully investigate consumer disputes, in addition to the aforementioned civil monetary penalty.



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.