FTC Launches Inquiry into Small Business Credit Reports

The Federal Trade Commission has launched an inquiry into the small business credit reporting industry, ordering five firms in that industry to provide the Commission with detailed information about their products and processes. The orders will be issued to Dun & Bradstreet, Experian Information Solutions, Equifax, Ansonia Credit Data, and Creditsafe USA.

“Like consumers, small businesses rely on fair and accurate credit reports in order to access key services. But because it isn’t covered by the same laws that apply to consumer services, credit reporting for businesses is tremendously opaque,” said FTC Chair Lina M. Khan. “This FTC inquiry will shine a much-needed light on the credit reporting industry and the related challenges that small businesses face.”

Unlike credit reports for individual consumers, which are governed by the Fair Credit Reporting Act, there is no federal law that specifically outlines processes and protections available to small businesses when it comes to credit reporting. This can make business credit reporting hard to understand, and it can be particularly difficult for small businesses to navigate how to correct errors or omissions in their credit reports in a timely fashion.

These reports can significantly affect small businesses, potentially impacting the terms on which they can obtain the goods, services, and equipment they need to stay in business. Because many of these credit reporting companies start developing a company’s credit report at the time it incorporates, tapping public records and other available financial data, business owners may not even be aware a report about them exists. Sometimes small businesses only discover they have a credit report when they are denied credit by a supplier.

The Commission’s inquiry will examine multiple aspects of how information is collected and processed for business credit reports, how the reports are marketed, and how and whether the credit reporting companies address factual errors in the reports. In addition to information about these topics, the orders also require the companies to provide information on services they provide to businesses to monitor or enhance their own credit reports.

Last April, the FTC secured an order with Dun & Bradstreet in which the company was required to make changes to its processes to help ensure that it responds promptly and fully to businesses’ complaints about incorrect information in their business credit reports, and to be upfront around the limitations of the company’s business credit reporting products. The company was also required to provide refunds to affected customers, and to make it easier for customers to cancel certain business credit report monitoring and managing products.

The FTC is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies without a specific law enforcement purpose. The companies will have 60 days from the date they receive the order to respond.

The Commission vote to issue the orders was 4-0.