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Unicor Funding, Inc., a California-based marketer of federally insured home improvement loans ("Title 1" loans), has agreed to pay a civil penalty of $100,000 for allegedly violating the Fair Credit Reporting Act (FCRA). The company also has agreed to settle FTC charges that it deceptively advertised that consumers were "preapproved" for a loan or that consumers' property was "preapproved."

"False preapproved offers injure consumers by giving false information that causes them to apply for credit unnecessarily and may affect their decisions to comparison shop for credit," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "This case is significant because it sends a strong message that lenders cannot use false offers to gain market advantage and boost consumer response."

Title 1 loans are often used by people with limited resources and/or credit problems for home maintenance and improvement. Unicor, located in Mission Viejo, California, is a non-bank lender that offers a variety of loans, including mortgages, debt consolidation loans, general home improvement loans, and Title 1 loans to consumers. It sells the loans it originates to other lending institutions.

According to the FTC, Unicor advertised its loans using direct marketing postcards that included, in bold-face type, a statement that the consumer was "pre-approved" or that the consumer's property was "pre-approved" to receive a loan of up to $25,000 or $35,000. The complaint outlining the charges against Unicor alleges that many consumers who responded to the postcards did not receive loans. Therefore, the agency said, the "preapproved" offer was deceptive.

In addition, the agency alleged in its complaint that Unicor violated the FCRA by using credit reports to "prescreen" consumer files for credit offers without providing required notices under the FCRA in solicitations resulting from the prescreening. The notices would state, among other things, that the consumer can opt-out of future prescreened solicitations. The complaint also alleges that Unicor used credit reports to evaluate consumer applicants but failed to provide FCRA-required information to applicants against whom adverse action was taken based on a credit report.

The proposed consent order to settle the charges would require Unicor to pay a civil penalty of $100,000 for the FCRA violations. It also would prohibit Unicor from using the term "pre-approved" to describe an offer unless the consumer receiving the offer actually receives credit. In addition, the settlement would require Unicor to clearly and conspicuously disclose in all advertising that an offer of credit will be subject to a credit review if Unicor intends to conduct such a review; and would prohibit the company from making misrepresentations in connection with credit offers. Finally, the order would require Unicor to provide the notices mandated by the FCRA when it "prescreens" consumers for credit solicitations and when it rejects consumers for credit because of information in a credit report.

The consent decree was filed at the FTC's request by the Department of Justice in the U.S. District Court, Central District of California, Southern Division on October 5, 1999.

The Commission vote to approve the consent decree was 4-0.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

Copies of the complaint and consent decree are available from the FTC's web site at and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.