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Credit Monitor’s Hard Sell Under Scrutiny

Increased Attention Follows Court’s Decision to Hear Lawsuit Over Practices

By Angus Loten and Joann S. Lublin

From The Wall Street Journal

The phone calls, letters and other sales tactics of Dun & Bradstreet Credibility Corp.—and its ties to its former parent, Dun & Bradstreet Corp.—are facing heightened scrutiny following a federal-court decision to hear a lawsuit brought by a family-owned business that accuses the companies of unfair and deceptive practices.

In a ruling earlier this month, Judge Thomas S. Zilly in Seattle, Wash., denied a motion by the Short Hills, N.J., credit-report giant Dun & Bradstreet to dismiss the suit, which was filed by O&R Construction LLC, a licensed general contractor in Oak Harbor, Wash.

Robyn Kolaitis, who co-owns O&R with her husband, says she has paid $69 a month to Credibility since May 2012 to monitor the information that banks, vendors and others see when they get a report from Dun & Bradstreet, also known as D&B, on the family firm’s creditworthiness. She has also continued to pay Credibility even as she pursues both companies in court. “I am not sure what [D&B] will do to my business credit rating” if O&R cancels the Credibility service, Mrs. Kolaitis said in an interview.

D&B has more than $1 billion in annual revenue and a global commercial database containing more than 230 million business records. Nearly four years ago, it spun off Dun & Bradstreet Credibility, a Los Angeles firm, from its credit-management service for small businesses.

Credibility sells a business-credit monitoring service and maintains ties with its former parent, paying D&B royalties for intellectual-property rights, for instance, and for access to D&B’s global commercial database. D&B and Credibility declined to comment on the licensing agreement.

In a statement, D&B said that it “has no ownership or management control over” Credibility. “D&B is proud to be the world’s leading source of commercial information and insight on businesses for over 170 years and intends to vigorously defend this lawsuit.” Credibility declined to comment on the lawsuit

In its lawsuit, which was initially filed in December 2012, O&R claims that a bad D&B business credit report in 2011 led one of its primary suppliers to lower the company’s credit line by $8,000 in 2012. That hurt the firm’s ability to bid on construction jobs, O&R said.

Late last week, D&B denied the lawsuit’s charges that instead of fixing errors in O&R’s credit report it alerted a Credibility sales agent to call Mrs. Kolaitis to sell her the Credibility monitoring service. D&B and Credibility also denied the rest of the suit’s allegations and opposed the plaintiffs’ request to treat the case as a class action.

A D&B business credit report typically lists, among other things, how many days a company generally takes to pay bills, including trade credit extended by vendors. The suit alleges the report falsely described O&R as slow to pay its bills and in “severe risk” of failure. It also contends that Credibility and D&B maintain close ties in order to more aggressively market credit-repair services and that they violated the unfair and deceptive practices law in Washington state.

About 300 salespeople at Credibility’s Tucson, Ariz., call center regularly phone thousands of businesses pulled from D&B’s database, says a former Credibility employee who quit last year. In a typical call, agents identify themselves as “credit advisers” who must verify data in a company’s D&B credit report, the ex-staffer recollected. He said they then follow a step-by-step playbook aimed at selling credit-management products, such as CreditBuilder, which allows businesses to boost their credit ratings by adding prompt bill payments to their profiles.

People who receive the calls “think it’s just an update to their file, but really it’s a sales pitch,” the former employee explained, adding that agents were expected to sell at least $4,500 of products and services during each eight-hour shift. He said he and his Credibility colleagues got trophies and gift cards for exceeding their sales quotas. A Credibility spokesman declined to comment on the former employee’s account.

As The Wall Street Journal reported in June, other small-business owners have received similar missives and phone calls from Credibility. Since January 2010, the Federal Trade Commission has received more than 670 complaints against “Dun & Bradstreet,” including at least 139 that specifically name Credibility, according to data obtained by the Journal under the Freedom of Information Act. At least 120 of the complaints—which range from unwanted sales calls to allegations of fraud and identify theft—have been received since June 2013. D&B and Credibility declined to comment on the FTC complaints.

Jason Brady, president of A-B Computer Solutions Inc. in Mandeville, La., says he spends roughly $1,200 a year for Credibility services to monitor his D&B credit report, which he says is used by federal agencies in awarding contracts. His 17-year-old company services information-technology equipment for the National Aeronautics and Space Administration and other big contractors and had more than $4 million in revenue last year.

Through the monitoring service, Mr. Brady says he discovered in February 2013 that D&B had wrongly reported that his company was late paying a $500 invoice from an unnamed supplier the previous month. Mr. Brady successfully disputed the claim, which was later removed from the company’s report. He says it’s too risky to cancel Credibility’s service because “you have to be very cautious about your credit.” D&B declined to comment on Mr. Brady’s credit report, and Credibility declined to comment on his use of its services.

Olga Tuttle, co-owner of a small Oregon City, Ore., winery, opened her mail this past Saturday to find an urgent missive. “BUSINESS CREDIT NOTIFICATION,” it read. “Your company’s credit file was recently purchased by a business interested in reviewing your D&B business scores and ratings. Please call Dun & Bradstreet Credibility Corp…to review the information in your D&B business credit file.”

The winery, which produces about 2,700 cases of Pinot Noir and other wines each year, has never had late-payment problems and even pays some vendors up front, Mrs. Tuttle says.

Yet someone in the “wine and distilled beverages industry” had purchased the winery’s “business credit file,” according to the letter, which was reviewed by the Journal. It warned that “current or potential business partners” could use that file to determine the winery’s rates on bank loans, as well as what it pays for insurance premiums and what payment terms it receives from vendors, such as grape growers or label makers.

Mrs. Tuttle says that a Credibility representative initially called her last year, identifying himself as a credit adviser. When she realized he was trying to sell her a costly monthly subscription to a credit-management service, she hung up. She also ignored a more aggressive sales pitch a week later. “It’s just not something we need,” she says. D&B and Credibility declined to comment.

Ross Shanberg, managing partner of Shanberg, Stafford & Bartz LLP in Irvine, Calif., and one of O&R’s lawyers, says tactics used by D&B and Credibility “are having a devastating impact on thousands of small businesses.” That’s why O&R attorneys are pushing to win class-action status for the lawsuit, Mr. Shanberg adds.