Bad internet reviews are the bane of business owners everywhere. Consumers flock to social media to air their grievances with companies, typically without fear of meaningful reprisal. This practice often leaves many corporate entities wondering what to do to deter this type of consumer sharing. When faced with this question – after reading less than desirable reports about customer interactions with his business – the owner of a California mortgage company decided to take retaliatory action. The results, as outlined in the proposed order, were consequential fines, injunctive mandates, and an instructive lesson on how not to handle the issue.
Defendant Ramon Walker, owner of Mortgage Solutions FCS, Inc. d/b/a Mount Diablo Lending, began posting scathing rebuttals to those who left critical statements on the business’s Yelp page, a practice that he continued over the course of a year. Walker’s internet banter came under the scrutiny of the Federal Trade Commission when it found that his responses revealed a plethora of personal information about the consumers, including their personal credit history, first and last names, debt-to-income ratios, tax information, health issues, sources of income, family relationships, and other protected information. The vindictive actions taken by Walker and Mortgage Solutions were not looked upon lightly by the FTC, which led to the matter before the United States District Court for the Northern District of California.
In U.S. v. Mortgage Solutions FCS, Inc. d/b/a Mount Diablo Lending and Ramon Walker, the FTC asserted that mortgage brokers, like defendants, have a substantial amount of personal information at their fingertips, which they are required to protect and narrowly use. The FTC found that Walker took to the online public forum in contrary to his duties to publish statements, such as:
The truth of the matter is [sic] you didn’t have one late 2 years ago. Your credit report shows 4 late payments from the Capital One account, 1 late from Comenity Bank which is Pier 1, another late from Credit First Bank, 3 late payments from an account named SanMateo. Not to mention the mortgage lates. All of these late payments are having an enormous negative impact on your credit score.
Despite preventative legislation in place to limit disclosures of such information, defendants willfully ignored the consumers’ right to privacy and disclosed nonpublic, personal information in violation of the Fair Credit Reporting Act, Regulation P, 12 C.F.R. Part 1016, and the rule regarding the Standards for Safeguarding Customer Information, 16 C.F.R. Part 314. Further, before engaging in this type of interaction with consumers, defendants were required to disclose their privacy practices to consumers, thereby allowing individuals an opportunity to opt out of the disclosure of their personal information. Instead, defendants further infringed upon Regulation P by failing, for a six-year period, to provide customers with a clear, conspicuous, and accurate privacy notice.
Adding to the list of claims, Walker’s postings were deemed an impermissible use of credit report information in violation of Section 1681b(f) of the FCRA and Section 5(a) of the FTC Act. Lastly, the Court found that defendants defied the Safeguards Rule when they failed to implement a comprehensive written information security program and test it regularly.
The long list of transgressions resulted in a $120,000 fine for violations of the FCRA, injunctive relief designed to protect consumers in the future, and the implementation of a comprehensive security program, which will require continued court oversight and applications for annual certification.
Consumers’ ability to leave negative feedback on social media about a company’s products or performance is a modern annoyance. Adding to the frustration, companies are prohibited by the Consumer Review Fairness Act from including non-disparagement provisions in their contracts with consumers. However, using a consumer’s personal information as a means of addressing and deterring future negative ratings is an unseemly and, more importantly, unlawful practice. Companies wishing to avoid consequences like those suffered by Walker and Mortgage Solutions should warn employees of the risks of posting retaliatory responses, and implement best practices designed to properly address online critiques.