CFPB charges credit reporting companies with deceptive marketing practices

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has charged credit reporting companies Equifax, Inc. and TransUnion, as well as their subsidiaries, with deceiving consumers about credit scores the companies sold to consumers. According to the bureau, the companies not only misrepresented the usefulness and actual cost of the credit scores but "lured consumers into costly recurring payments for credit-related products with false promises." The CFPB entered separate consent orders against Chicago-based TransUnion and Atlanta-based Equifax that require the companies to pay a total of more than $17.6 million in restitution to consumers and fines totaling $5.5 million to the CFPB.

 

“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.”

 

Charges. The CFPB alleged that from at least July 2011 until March 2014, both TransUnion and Equifax violated the Dodd-Frank Act by falsely representing that the credit scores they marketed and provided to consumers were the same scores lenders typically use to make credit decisions. The bureau also charged that the credit reporting companies falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only "$1." Finally, the CFPB alleged that Equifax violated the annual free credit report provisions of the Fair Credit Reporting Act by requiring consumers to view Equifax advertisements before receiving their free credit reports.

 

Consent orders. Under the terms of its consent order, Equifax, along with its subsidiary Equifax Consumer Services, LLC, must provide almost $3.8 million in restitution to affected consumers. The consent order for TransUnion, and its subsidiaries TransUnion Interactive, Inc., and TransUnion LLC, requires payment of $13.9 million in restitution to affected consumers.

 

Under the consent orders, both credit reporting companies also must:

• clearly inform consumers about the nature of the scores they are selling to consumers;
• obtain the express informed consent of consumers before enrolling them in any credit-related product with a negative option feature; and
• give consumers a simple, easy-to-understand way to cancel the purchase of any credit-related product, and stop billing and collecting payments for any recurring charge when a consumer cancels.

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