Experian fined $3 million for deceptive credit score marketing
Big credit bureau mislead consumers, watchdog agency says
By Fred O. Williams | Published: March 23, 2017
Expert on consumer credit laws and regulations
The big credit bureau Experian agreed to pay a $3 million fine to the federal government’s consumer watchdog and reform the way it markets credit scores, the Consumer Financial Protection Bureau announced Thursday.
“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” CFPB Director Richard Cordray said in the announcement.
From at least 2012 through 2014, Experian’s marketing statements let consumers think that the scores they bought were used by lenders to approve or reject loans. In fact, the company’s “PLUS Score” was not used by lenders, and could differ substantially from scores lenders did use, according to the March 23 consent order.
“Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives,” Cordray said.
Experian’s marketing strategies violated rules against deceptive practices in the Dodd-Frank Consumer Protection Act, the bureau said. The company also violated the Fair Credit Reporting Act by displaying online ads to consumers before they had obtained their free annual credit report via AnnualCreditReport.com. Consumers are entitled to a free copy of their credit report once a year under the FCRA. After entering the AnnualCreditReport.com portal, they are directed to sites operated by the major credit bureaus, including Experian.
The company agreed to the penalty without admitting or denying wrongdoing. The consent order names the California-based parent company Experian Holdings Inc. and its units Experian Information Solutions Inc. and ConsumerInfo.com Inc., doing business as Experian Consumer Services.
Experian said in an emailed statement that it did not believe it violated the law. It agreed to the order in order to stay focused on its business.
“The consent order addresses past products and marketing practices, and does not reflect current marketing practices,” the company said. Current marketing – with limited changes – already complies with the order, the company added.
Experian’s U.S. website now offers consumers a look at their FICO credit score, the one most often used by lenders, for $1 when checking their credit report.
The consumer bureau’s penalty comes after similar crackdowns on Equifax and TransUnion, the two other major credit bureaus, in January. In addition to reforming their marketing, those companies were ordered to pay a combined $17.7 million in refunds to consumers after charging for credit scores marketed as “free.” The orders also included fines of $5.5 million.
Thursday’s order on Experian does not mandate refunds or accuse the company of misleading customers about the price of credit scores it sold.
Experian’s $3 million fine will go to the CFPB’s Civil Penalty Fund, which compensates harmed consumers and supports financial literacy programs. The company cannot claim tax credits or deductions for the amount, recover it through insurance, or use it to offset other potential penalties from regulators or court rulings.
- Borrowing from friends and family: Your 6-step guide – If as a last resort you need to ask you family or friends for money there are way to make it more palatable for both of you ...
- Consumer protection bureau warns about pay-by-phone fees – The government's consumer watchdog issued a warning Monday that companies are charging pay-by-phone fees that can be unnecessary and misleading ...
- DIY credit card arbitration: You may be able to opt out – Consumers can preserve their right to go to court instead of private arbitration in many cases by going through and opt-out process ...