The Consumer Financial Protection Bureau revealed in a press release on Tuesday that it is not only fining TransUnion but Equifax as well for deceiving consumers in marketing credit scores and credit products.
Chicago-based TransUnion and Atlanta-based Equifax are two of the nation’s three largest credit reporting agencies. The other top credit reporting agency is Experian.
According to the bureau, it took action against Equifax, TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers.
The bureau also asserted that the companies lured consumers into costly recurring payments for credit-related products with false promises.
As a result, the two companies must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
Broken up, TransUnion must provide more than $13.9 million in restitution to affected consumer and $3 million to the Bureau’s civil penalty fund. Equifax must provide almost $3.8 million in restitution to affected consumers and pay $2.5 million to the Bureau’s civil penalty fund.
Both were also ordered to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services.
HousingWire first broke late last week that TransUnion would pay just shy of $17 million as part of a settlement with the CFPB, as revealed by a filing with the Securities and Exchange Commission. Now not even a week later, the CFPB’s report revealed Equifax was fined too.
“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
The CFPB stated that TransUnion, since at least July 2011, and Equifax, between July 2011 and March 2014, violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by:
- Deceiving consumers about the value of the credit scores they sold: In their advertising, TransUnion and Equifax falsely represented that the credit scores they marketed and provided to consumers were the same scores lenders typically use to make credit decisions. In fact, the scores sold by TransUnion and Equifax were not typically used by lenders to make those decisions.
- Deceiving consumers into enrolling in subscription programs: In their advertising, TransUnion and Equifax falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only “$1.” In reality, consumers who signed up received a free trial of seven or 30 days, after which they were automatically enrolled in a subscription program. Unless they cancelled during the trial period, consumers were charged a recurring fee – usually $16 or more per month. This billing structure, known as a “negative option,” was not clearly and conspicuously disclosed to consumers.
In addition, Equifax also violated the Fair Credit Reporting Act, which requires a credit reporting agency to provide a free credit report once every 12 months and to operate a central source – AnnualCreditReport.com – where consumers can get their report.
However, until January 2014, consumers getting their report through Equifax first had to view Equifax advertisements, which violates the Fair Credit Reporting Act.
Here are statements from both companies on the announcement.
Equifax provided the following statement:
The CFPB’s investigation into these matters has been ongoing for nearly three years, and Equifax implemented changes addressing the CFPB’s concerns shortly after the investigation began. While Equifax does not believe it has violated any laws and has not admitted any liability, Equifax determined it was in its best interest to resolve the matter with the CFPB. Equifax remains committed to providing products and services that educate and alert consumers about their credit and identity and ensuring transparency and clarity about the value of those products and services.
TransUnion provided the following statement:
We continue to believe that our consumer marketing has been clear and has complied with the law and other government guidance. Our trial credit monitoring service has given consumers low-cost access to their credit report and credit score and allowed them to conveniently cancel monitoring services at any time online or by phone.
However, we are committed to making improvements to our consumer experience, and over the past several months we have worked cooperatively with the CFPB to be the industry leader in designing the enhanced, voluntary marketing disclosures that go beyond the current legal and regulatory requirements to which we agreed as part of this settlement.
In addition, Barrett Burns, president and CEO of VantageScore Solutions, which is owned by TransUnion, stated, “As the CFPB has pointed out, no one credit score model can singularly represent the consumer lending marketplace. In addition to all three VantageScore models and the dozens of FICO models that are in use today, many lenders may rely upon their own proprietary models to grant or manage credit.”
“When a score is provided to a consumer, he or she should be clearly informed that a credit score is only one of many factors considered by lenders and that the particular score being provided is unlikely to be the one actually used to make any given credit decision,” said Burns. “Although VantageScore Solutions does not sell credit scores, we work hard to ensure that consumers who receive a VantageScore credit score will also be able to review educational content about our model and the credit scoring process in general.”