Two private investigators yesterday pleaded guilty to illegally procuring telephone customer data as part of a probe contracted out by a personal finance subsidiary of Lloyds TSB bank.

Black Horse, which is wholly owned by the bank, said it was unaware of the pair's criminal activities and had cut ties with a third private investigator who had sub-contracted the work to the two men.

The case highlights the potential problems facing companies - including newspapers - who contract out information-gathering at a time when the privacy watchdog says the illegal trade in data is flourishing.

Christopher Hackett and Darren Whalley admitted to Wimbledon magistrates' court that they had illegally obtained and sold personal information. Mr Hackett was fined £400 with £400 costs and Mr Whalley £500 with £400 costs.

The Information Commissioner's Office said Mr Hackett had posed as employee of the BT telecoms group to persuade a bona fide worker at the company to give him personal information about a woman whose partner owed money to Black Horse. As a result, Mr Hackett found out the address of the woman, who was then visited by Black Horse.

The trick was uncovered after BT became suspicious and reported Mr Hackett's call to the Information Commissioner's Office.

Black Horse had believed the data it was using had been gathered legally, the Information Commissioner's Office said. The company had contracted the work to a private investigator, who sub-contracted it to Mr Whalley, who in turn sub-contracted it to Mr Hackett.

Black Horse, which offers loans to customers for cars and other consumer goods, such as kitchen appliances, said the private investigator it had originally employed had breached rules forbidding him from sub-contracting work.

The company said that, although it had systems to vet its contractors and review individual cases, it was to some extent dependent on their honesty in behaving properly in often "challenging" situations.

It said: "They have signed a contract, and we are reliant on the information we are provided with."

In 2006, the Information Commissioner's Office said it had found a "pervasive and widespread" illegal trade in people's addresses, details of car ownership, ex-directory telephone numbers, criminal records and bank details. Financial institutions, local authorities and journalists hired tracing agents to obtain personal details that would help track down debtors, estranged spouses, witnesses in court cases and jurors.

Plans to introduce jail sentences of up to two years for people convicted of illegally buying and selling information were watered down earlier this year after lobbying by big media groups.