One of the data purchasers, Ideal Financial Solutions of Las Vegas, reportedly used the records it bought to make unauthorized withdrawals from consumers’ bank accounts, according to a separate federal lawsuit.
The complaints are part of a multiyear government crackdown on fraudulent debt collection and other scams that target people in financial distress. But the case against LeapLab indicates that federal regulators are now widening their investigation to include the middlemen who traffic in the kind of secret consumer details that can make consumers vulnerable to financial scams.
“We have been targeting the actual fraudsters for years. Now we are really trying to move behind the scenes and target the data brokers,” Jessica Rich, the director of the F.T.C.’s Bureau of Consumer Protection, said in a phone interview Tuesday. “The message is that selling consumers’ highly sensitive data to third parties, with either the knowledge or a strong suspicion that they have no legitimate need for it, violates the law.”Litigation by the FTC against LeapLab features the claim that the broker
obtained files on hundreds of thousands of consumers who were applying for payday loans from lead generators. These are companies that set up consumer-friendly sites, typically asking users to provide their contact information and specific financial details, with the goal of marketing access to potential customers to businesses like payday lenders and insurers.
According to the complaint, LeapLab bought payday loan applications containing consumers’ names, addresses, phone numbers, employer name, Social Security numbers, bank account numbers and bank routing numbers. But federal regulators say that the company sold only about 5 percent of those records to online lenders, who paid between $10 to $150 to acquire each loan application. The remaining records were sold, without consumers’ knowledge or consent, for about 50 cents each to non-lenders including “fraudsters, spammers and telemarketers,” the complaint said.
“They sold information that could only be used for illegitimate purposes and that is what happened,” said James A. Kohm, associate director of the division of enforcement in the F.T.C.’s consumer protection bureau.
Federal regulators said that one company, Ideal Financial Solutions, bought at least 2.2 million consumer dossiers from LeapLab and other information middlemen. The company used the information to make about $43 million in unauthorized bank withdrawals or charges without providing any product or services to consumers in exchange for the money