Bureau fines 'bureaus' for deceptive marketing
The Consumer Financial Protection Bureau has announced it has taken action against Equifax, Inc., TransUnion, both credit reporting agencies (often called "credit bureaus"), and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The Bureau's press release said the companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB ordered TransUnion and Equifax to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Between them, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
According to the CFPB, "The scores that TransUnion sells to consumers are based on a model from VantageScore Solutions, LLC. Although TransUnion has marketed VantageScores to lenders and other commercial users, VantageScores are not typically used for credit decisions. Scores Equifax sold to consumers were based on Equifax’s proprietary model, the Equifax Credit Score, which is an 'educational' credit score that also is typically not used by lenders to make credit decisions."
"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.
"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. Until January 2014, consumers getting their report through Equifax first had to view Equifax advertisements. This violates the Fair Credit Reporting Act, which prohibits such advertising until after consumers receive their report."
The Consent Order against Equifax requires the payment of almost $3.8 million in restitution to affected consumers, and of $2.5 million to the Bureau's civil penalty fund.
The Consent Order against Transunion requires the payment of more than $13.9 million in restitution to affected consumers, and of $3 million to the Bureau's civil penalty fund.