[Federal Register Volume 68, Number 13 (Tuesday, January 21, 2003)]
[Notices]
[Pages 2775-2776]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1215]


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FEDERAL TRADE COMMISSION

[Docket No. 9304]


Quicken Loans Inc.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the complaint and 
the terms of the consent order--embodied in the consent agreement--that 
would settle these allegations.

DATES: Comments must be received on or before January 29, 2003.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580. Comments filed in electronic form should be 
directed to: [email protected]., as prescribed below.

FOR FURTHER INFORMATION CONTACT: Bradley Blower or Thomas Kane, FTC, 
Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., 
Washington, DC 20580, (202) 326-3224.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and section 
3.25(f) of the Commission's Rules of Practice, 16 CFR 3.25(f), notice 
is hereby given that the above-captioned consent agreement containing a 
consent order to cease and desist, having been filed with and accepted, 
subject to final approval, by the commission, has been placed on the 
public record for a period of thirty (30) days. The following Analysis 
to Aid Public Comment describes the terms of the consent agreement, and 
the allegations in the complaint. An electronic copy of the full text 
of the consent agreement package can be obtained from the FTC Home Page 
(for December 30, 2002), on the World Wide Web, at ``http://
www.ftc.gov/os/2002/12/index.htm.'' A paper copy can be obtained from 
the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, 
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If a comment contains 
nonpublic information, it must be filed in paper form, and the first 
page of the document must be clearly labeled ``confidential.'' Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as 
part of or as an attachment to e-mail messages directed to the 
following e-mail box: [email protected]. Such comments will be 
considered by the Commission and will be available for inspection and 
copying at its principal office in accordance with section 
4.9(b)(6)(ii) of the Commission's Rules of Practice, 16 CFR 
4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted an agreement, subject to 
final approval, to a proposed consent order from Quicken Loans Inc. The 
proposed order would settle charges that Quicken

[[Page 2776]]

Loans violated Section 615(a) of the Fair Credit Reporting Act 
(``FCRA''), 15 U.S.C. 1681m(a), and Section 5 of the Federal Trade 
Commission Act. Section 615(a) requires that a credit grantor who takes 
adverse action with respect to a consumer, based in whole or in part on 
information contained in a credit report (``consumer report''), notify 
the consumer of the adverse action as well as the identity of the 
credit bureau (``consumer reporting agency'') that produced the report, 
so the consumer can identify and correct any inaccuracies in the 
report.
    The proposed consent order has been placed on the public record for 
thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement and take other appropriate action or make 
final the agreement's proposed order.
    According to the Commission's Complaint, for a period of 
approximately one year, Quicken Loans offered loans to consumers 
through its website. Quicken Loans invited consumers to submit 
information, such as their income and assets, and the loan amount, down 
payment and type of loan sought. Consumers then were invited to request 
that Quicken Loans either ``prequalify'' the consumer for a loan based 
solely on information the consumer had entered, or ``preapprove'' the 
consumer for a loan based on the consumer's consumer report, as well as 
the consumer-supplied information. To select the preapproval option, 
consumers were required to click a radio button next to the statement 
``Order my credit report and use it to preapprove me for a loan.'' 
According to the Complaint, by selecting this option, consumers were 
filing applications for preapproval of a loan.
    For those consumers who requested preapproval, Quicken Loans 
obtained consumer report from consumer reporting agencies and used the 
reports, along with consumer-supplied information, to evaluate the 
consumers' creditworthiness for any of its online loan products. For 
those consumers whom Quicken Loans preapproved for one of its online 
loan products, respondent provided an online preapproval letter 
containing the specific terms (e.g., loan amount, interest rate, 
points, and APR) of the loans for which the consumers were preapproved.
    Those consumers whom respondent did not preapprove for one of its 
online loan products received an online advisory informing them that, 
``[b]ased on the information you have provided, it appears that you 
have unique borrowing needs.'' Quicken Loans invited these consumers to 
click a button reading ``NEXT STEP'' to permit a Quicken Loans loan 
consultant to contact them about other possible Quicken Loans loan 
options. The Commission's Complaint alleges that the message 
communicated through the advisory was that consumers' online 
applications for preapproval had been denied. As a result, many 
consumers who received this advisory left the website without 
submitting contact information. Consumers who received the ``unique 
borrowing needs'' advisory but did not then submit contact information 
online received no further contact from respondent. The Complaint 
alleges that, through the actions described above, Quicken Loans took 
adverse action with respect to consumers in some instances, based in 
whole or in part on information contained in consumer reports, but 
failed to provide the notice required by Section 615.
    Part I of the proposed order requires that whenever Quicken Loans 
takes adverse action with respect to a consumer's application for 
credit, based either wholly or partly on information in a consumer 
report, Quicken Loans must provide the consumer with a notice that 
complies with Section 615(a). Part I also provides that the Commission 
would not view Quicken Loans' failure to grant an online request for 
preapproval as an adverse action if the company meets certain specific 
requirements, which include that (1) Quicken Loans provides a clear and 
conspicuous disclosure in close proximity to the preapproval offer that 
preapproval may be granted online or offline; and (2) if Quicken Loans 
determines it cannot grant preapproval online because it needs 
additional information, it will notify the consumer that (a) the 
request for preapproval has not been denied, but rather that Quicken 
Loans needs additional information from the consumers, and (b) if the 
consumer submits the additional information, Quicken Loans will 
determine whether to grant the request and communicate the decision to 
the consumer.
    Parts II through VI of the proposed order are reporting and 
compliance provisions. Part II requires that Quicken Loans maintain and 
make available for Federal Trade Commission inspection and copying 
documents demonstrating compliance with Part I of the order. Part III 
requires dissemination of the order now and in the future to persons 
with responsibilities relating to the subject matter of the order. Part 
IV ensures notification to the FTC of changes in corporate status. Part 
V mandates compliance reports within sixty (60) days after service of 
the order and at such other times as the FTC may require. Part VI is a 
provision ``sunsetting'' the order after twenty (20) years, with 
certain exceptions.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.
    This proposed order, if issued in final form, will resolve the 
claims alleged in the complaint against the named respondent. It is not 
the Commission's intent that acceptance of this consent agreement and 
issuance of a final decision and order will release any claims against 
any unnamed persons or entities associated with the conduct described 
in the complaint.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 03-1215 Filed 1-17-03; 8:45 am]
BILLING CODE 6750-01-M