Equifax and TransUnion, two of the nation’s three largest credit bureaus, have agreed to pay $23 million to settle charges they deceived consumers about the usefulness and cost of credit scores they sold to consumers.
The companies also made false promises to lure consumers into costly recurring payments for credit-related products, the Consumer Financial Protection Bureau said.
The bureau ordered TransUnion and Equifax to tell the truth about the value of the credit scores they provide and the cost of obtaining those credit scores and other services.
TransUnion and Equifax are being required to pay more than $17.6 million in restitution to consumers and fines of $5.5 million to the bureau.
“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 Richard Cordray, director of the bureau. “Credit scores are central to a consumer’s financial life, and people deserve honest and accurate information about them.”
TransUnion and Equifax collect credit information, including a borrower’s payment history, amount of debt, credit limits, names and addresses of current creditors, and other information about their credit. These generate credit reports and scores that are given to businesses.
Through their subsidiaries, TransUnion Interactive and Equifax Consumer Services, the companies also market, sell, or provide credit-related products directly to consumers, such as credit scores, credit reports, and credit monitoring.
Credit scores are numerical summaries designed to predict consumer payment behavior in using credit. Many lenders and other commercial users take these scores into consideration when deciding whether to extend credit. Lenders use a variety of credit scores, which vary by provider.
The scores that TransUnion sells to consumers are based on a model from VantageScore Solutions. Although TransUnion has marketed VantageScores to lenders and other commercial users, VantageScores aren’t typically used for credit decisions.
Scores Equifax sold to consumers were based on Equifax’s model, the Equifax Credit Score, which is an “educational” credit score that also isn’t typically used by lenders to make credit decisions.
TransUnion, since July 2011, and Equifax, between July 2011 and March 2014, violated federal consumer protection laws 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 usually use to make credit decisions. However, that wasn’t true.
- Deceiving consumers into enrolling in subscription programs: In their advertising, TransUnion and Equifax claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only “$1.” However, consumers who signed up received a free trial of seven or 30 days, were then 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 wasn’t clearly disclosed to consumers.
Equifax also violated federal law, 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 had to view Equifax advertisements before they received their report.
For more information on credit scores, see What You Need to Know: Understanding Why Offers for “Your” Credit Score Are Not All the Same.
