Far West Credit settles with FTC
By MortgageDaily.com staff
1/18/2006

A Utah-based credit reporting agency will pay thousands of dollars to the Federal Trade Commission to settle charges that it allegedly did not verify data when creating a credit report for FHA borrowers, some of whom have defaulted on the loans.

The FTC alleges Far West Credit Inc. violated the Fair Credit Reporting Act and the FTC Act by not following reasonable procedures to assure the accuracy of the information in the consumer reports it sold to mortgage companies, according to an announcement Tuesday.

Far West reportedly buys credit reports from the three major credit reporting agencies, Equifax, TransUnion and Experian, and merges the information about the consumers to create a file on them.

In cases where the three agencies' information about a consumer's credit worthiness is insufficient or not available, Far West accepts information from the consumer, or other interested parties, to show the consumer's credit status with businesses such as cable, utility and rent-to-own companies -- "operations that do not report normally to the nationwide credit bureaus" -- and adds the information to the consumer's credit report, FTC noted.

A complaint by the FTC says Keystone Mortgage and Investment Co. provided Far West with documentation of borrowers' credit accounts for such to be used in creating consumer reports for borrowers who had insufficient credit histories. However, Far West allegedly did not adequately review and verify the information submitted by the home lender.

"In fact, the documentation provided by Keystone for many of these consumers was false," the complaint reads. In many instances, "the documentation related to accounts with utility and cable companies that did not service the areas where the consumers lived and the same document was used to create records for multiple individuals."

Keystone used the inaccurate credit reports provided by Far West to make mortgage loans insured by the Federal Housing Administration, the FTC said.

"Some of the mortgages have defaulted, resulting in losses to the FHA program," the FTC said in the announcement.

The court is authorized to award civil penalties of up to $2,500 for every instance in which a consumer reporting agency does not follow reasonable procedures to assure maximum possible accuracy of the information they disseminate in consumer reports.

Far West will pay $120,000 in civil penalties to settle the charges. The settlement requires that Far West put reasonable procedures in place to assure the maximum possible accuracy of information in the consumer reports it prepares, and calls for the Salt Lake City-based agency to follow certain record keeping and reporting requirements to allow the FTC to monitor compliance.

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