TransUnion and Equifax lured consumers into buying costly credit scores not really used by lenders, consumer watchdog says
Two of the big three credit bureaus will pay a combined $23.2 million in refunds and fines for unfairly luring consumers into paying for costly credit scores, the U.S. Consumer Financial Protection Bureau announced Tuesday.“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” CFPB Director Richard Cordray said in a statement on the action, which includes $17.7 million in consumer refunds. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
The companies offered low- or no-cost credit scores online as bait for costly recurring subscription programs, the CFPB charged. Consumers who failed to cancel the subscriptions were billed for recurring charges, usually at a cost of $16.99 a month.
Sold scores seldom used by lenders
The credit bureaus also misrepresented the scores as being the same as those used by lenders to make credit decisions, the CFPB said. TransUnion sold VantageScore scores while Equifax sold its in-house educational scores, neither of which are usually used in lending decisions.
In a statement, VantageScore President Barret Burns said that lenders may use one of dozens of FICO scoring models, as well as one of three VantageScore models, to grant credit or manage loans to existing customers. “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,” Burns said, “and that the particular score being provided is unlikely to be the one actually used to make any given credit decision.” VantageScore is owned by the three major credit bureaus.
Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.
|\u2014 Richard Cordray|
Consumer Financial Protection Bureau
Refunds and fines
TransUnion agreed to pay refunds of $13.9 million and fines of $3 million to the agency’s penalty fund, which underwrites future investigations. Equifax will pay about $3.8 million in refunds and a $2.5 million fine.
The credit bureaus said in statements that they believed their credit score marketing was not outside the law; however, they said they committed to improve their marketing. In their consent orders with the agency, the companies neither admitted nor denied the CFPB’s charges of legal wrongdoing. Equifax said it modified its credit score marketing three years ago, shortly after the agency began investigating the issue.
The CFPB charged that both companies violated the Consumer Financial Protection Act with deceptive marketing of credit scores. It also charged that Equifax violated the Fair Credit Reporting Act by placing ads on the AnnualCreditReport.com website before consumers could access their free credit reports as provided under the act.
Who is eligible for refunds
TransUnion: About 700,000 customers who enrolled in opt-out or “negative option” subscription programs since July 2011 through the present, and who canceled within two billing periods without receiving a refund.
Equifax: An unspecified number of consumers who enrolled in an opt-out free trial subscription in response to company ads from July 21, 2011, through March 14, 2014, and who canceled within two billing periods, or within four billing periods if the ad was run by an affiliate marketer.
Under the CFPB order, the credit bureaus will submit their plans for identifying customers who are owed reimbursements within 60 to 90 days. If the total ordered refunds are not distributed, the unspent portion will be turned over to the Treasury.
The federal action follows an October 2016 crackdown on credit bureau marketing and credit report errors by Mississippi’s attorney general. That action included Experian, the third large U.S. credit bureau, which was not involved in the CFPB’s consent orders announced Tuesday.