Two of the largest credit reporting agencies, TransUnion and Equifax, are being fined by the Consumer Financial Protection Bureau (CFPB) for allegedly deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers.
The bureau also alleges that the companies lured consumers into costly recurring payments for credit-related products with false promises.
As per the CFPB, TransUnion must provide more than $13.9 million in restitution to affected consumers, while Equifax must provide almost $3.8 million in restitution to affected consumers.
In addition, TransUnion must pay $3 million to the bureau’s civil penalty fund, while Equifax must pay $2.5 million to the bureau’s civil penalty fund.
The bureau alleges the agencies violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by deceiving consumers about the value of the credit scores they sold.
Specifically, 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 to consumers are typically not used to make lending decisions.
The bureau also alleges the companies deceived consumers into enrolling in subscription programs. Specifically, in their advertising, they 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 canceled 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.
The bureau further alleges that Equifax 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 reports. Until January 2014, consumers getting their reports through Equifax first had to view Equifax advertisements. This violates the Fair Credit Reporting Act, which prohibits such advertising until after consumers receive their reports.
The bureau claims that, in the case of TransUnion, these activities took place since at least July 2011. In the case of Equifax, the activities took place between July 2011 and March 2014.
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