Vivint 'Pleased' to Put FTC Credit Complaint 'Behind Us,' Says CEO

After agreeing to pay $20 million to settle an FTC complaint last month that the company misused credit reports to help unqualified customers obtain financing for products and services, Vivint is “pleased to put this matter behind us,” said CEO Todd Pedersen on the company’s Q1 earnings call Thursday. Vivint “takes matters of compliance seriously,” said the executive.

Vivint had already acted to strengthen compliance policies and will continue to make it a priority going forward before the FTC began its review, said Pedersen. The company is “deeply committed to operating with integrity” and “doing right by our customers,” Pedersen said. Under the settlement, Vivint will pay a $15 million civil penalty and an additional $5 million to compensate injured consumers. Vivint’s sales staff stole people’s personal information to approve others for loans, said Daniel Kaufman, FTC Bureau of Consumer Protection acting director. “For misusing consumer credit reports and other sensitive data, and harming people’s credit, this company will pay $20 million.”

Vivint uses door-to-door sales representatives working on a commission-only basis to sell the company’s home security devices and monitoring services, said the FTC complaint, which alleged some Vivint sales representatives used “white paging” to find another consumer with the same or a similar name on the White Pages app and used that consumer’s credit history to qualify the prospective unqualified customer. Reps also asked customers to provide the name of someone they knew who had better credit, such as a relative, and added that innocent third-party as a co-signer to the account without permission; they then used that person's credit history to qualify the prospective customer, said the complaint.

If customers qualified using the deceptive tactics later defaulted on their loans, Vivint referred the innocent third party to its debt buyer, potentially harming that consumer’s credit and subjecting the person to debt collectors, the FTC alleged. Many consumers whose credit reports were misused by Vivint sales representatives complained to the FTC that they were victims of identity theft after being contacted by Vivint’s debt collectors. The FTC alleged Vivint was aware of the problem and terminated many sales representatives for misconduct, "only to rehire some of them shortly thereafter." Pedersen said the company had some salespeople in 2017 who "got around some systems," and the company "let those people go."

The settlement requires Vivint to implement an employee monitoring and training program, plus an identity theft prevention program. The company must also establish a customer service task force to verify that accounts belong to the right customer before referring any account to a debt collector, and must assist consumers who were improperly referred to debt collectors, said the FTC. The company must also obtain biennial assessments by an independent third party to ensure it’s complying with the Fair Credit Reporting Act.

Vivint added 60,127 subscribers in Q1, a 20% year-on-year increase, and revenue grew 13.2% to $343.3 million. It had over 1.7 million subscribers, up 10%, said Pedersen. The attrition rate was the lowest in the last nine quarters, he said. Shares closed 19.5% higher Friday at $14.01.

The company maintained its 2021 outlook of 1.8 million-1.85 million subs and revenue of $1.38 billion-$1.42 billion, despite logistics challenges in the supply chain and hiring constraints, said Chief Financial Officer Dale Gerard. The company is in “good shape” with cameras, but higher adoption rates than expected -- or a disruption in chip manufacturing or getting cameras from ports -- could limit the number the company can sell in Q3 and Q4, Gerard said. It’s also challenged by finding enough installers and service professionals to “take care of the customers the way we want to take care of them.”