ANALYSIS OF PROPOSED CONSENT ORDER TO AID PUBLIC COMMENT

The Federal Trade Commission has accepted an agreement to a proposed consent order from Hooper Holmes, Inc., through its Credit Index Division.

The proposed consent order has been placed on the public record for 60 days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw the agreement or make final the agreement's proposed order.

Credit Index is a consumer reporting agency which issues reports concerning previous delinquent or unpaid obligations reported to it by its subscribers.

The first section of the complaint accompanying the order alleges that Credit Index violated Section 604 of the Fair Credit Reporting Act by responding to requests for information on a consumer applying for credit or other business transactions by including in its reports information concerning individuals having the same mailing address as the individual inquired upon and similar last names. The complaint alleges that in some of these instances, the respondent has furnished information on individuals other than the one inquired on, in violation of the FCRA.

The proposed order generally prohibits Credit Index from future violations of Section 604.

The second complaint allegation, which supplements the first, is that respondent has also violated Section 607(b) of the Fair Credit Reporting Act by including in its reports information concerning all individuals having similar last names but the same mailing address as the consumer inquired upon. Inclusion of this information is alleged to have interfered with the accuracy of the report.

The proposed order generally prohibits future violations of Section 607(b) of the Fair Credit Reporting Act. The order further provides that the respondent may provide reports including information listed under identifiers (e.g. names and addresses) that are inconsistent with the identifiers used in the inquiry only if it can show, on a statistically valid basis, that its reporting system is reasonably designed to retrieve and report such information only in instances in which an individual consumer is using different identifiers as a means of deceiving respondent or its subscribers. The proposed order also prescribes specific rules which respondent

must use in determining whether a particular last name or first name is inconsistent with the name in which the inquiry is made prior to performing a statistical analysis of its reporting system.

The third section of the complaint alleges that the respondent has violated Section 5 of the Federal Trade Commission Act through unfair practices in connection with the collection of debts. Respondent is alleged to have forwarded letters to consumers threatening inclusion in respondent's national delinquent debtor file unless the consumer pays allegedly delinquent debts. The following is typical of the demands contained in the letter:

"We have received a report from your creditor on
your overdue account. This information is being in-
cluded in our computerized national delinquent
debtor file, and will be reported to anyone of the
credit granting firms using our services should
they order a credit report on you.

Your record will remain in our system for at least
five years unless you take action now to settle
this account.

Your credit file will show this serious past due
amount with ...

Enclose this letter with payment in full today ..

...

The complaint alleges that in making these demands the respondent failed to disclose to the debtors the material fact that the Fair Credit Reporting Act covers its reporting of credit information and that the consumer has the right to dispute the accuracy of any item of information contained in his or her file, have the respondent investigate such information and delete any inaccurate information or record the current status of incomplete information.

The proposed order corrects this problem by requiring the respondent to provide each consumer to whom it sends such a collection letter with a notice of the consumer's rights under the Fair Credit Reporting Act as well as the notice prescribed by Section 809 of the Federal Fair Debt Collection Practices Act. The final section of the complaint alleges that respondent has violated Section 5 of the Federal Trade Commission Act by reporting a summary of all items of adverse information reported at the same address as the consumers inquired upon in a name other than the name of the consumer reported on. Similarly, the complaint alleges that respondent violated Section 5 of the Federal Trade Commission Act by reporting in connection

with inquiries on a specific consumer, a summary of all inquiries which the respondent has received at the address of the consumer but under names other than the consumer's. The complaint alleges that in a substantial number of instances these summary items have been used to deny credit to consumers based on information which in fact relates to individuals other than the consumers who have applied for credit, including individuals, such as prior residents, neighbors and relatives of the consumer, who have or at some time in the past have had the same mailing address as the consumer.

The proposed order prohibits Credit Index from issuing reports containing "activity" or "summary" items. The order allows Credit Index to use "activity" or "summary" item reports internally to identify credit applications for which respondent will conduct additional investigation, but prohibits respondent from recommending rejection or otherwise directly or indirectly issuing a negative report based solely on a summary or activity item or on an applicant's failure to respond to a request for additional information.

Finally, the order seeks to establish a mechanism under which consumers will have notice of use of respondent's reports and a meaningful opportunity to correct any error by requiring Credit Index to remind its subscribers of their obligation to notify applicants who are rejected based, in whole or in part, on a Credit Index report of that fact and of Credit Index's name and address. The order further requires Credit Index to provide consumers who request disclosure of the information in their file with a copy (or transcription) of the report by mail and a summary of the consumer's right under the Fair Credit Reporting Act.

The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.

A copy of advertising material explaining respondent's reports is attached.