WASHINGTON – Jan. 4, 2017 – According an action taken by the Consumer Financial Protection Bureau (CFPB), Equifax, TransUnion and their subsidiaries may have deceived consumers about the usefulness and actual cost of credit scores they sold.

CFPB says the companies also lured consumers into costly recurring payments for credit-related products with false promises and 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 in addition to $5.5 million in fines 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," says CFPB Director Richard Cordray. "Credit scores are central to a consumer's financial life and people deserve honest and accurate information about them."

Chicago-based TransUnion and Atlanta-based Equifax are two of the nation's three largest credit reporting agencies. TransUnion and Equifax collect credit information, including a borrower's payment history, debt load, maximum credit limits, names and addresses of current creditors, and other elements of their credit relationships. These generate credit reports and scores that are provided 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.

One of the problems cited by CFPB: No single credit score or credit score model is used by every lender, and credit scores vary by score provider and scoring model. The scores that TransUnion sells to consumers are based on a model from VantageScore Solutions, and VantageScores aren't 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 also not typically 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 CFPB says 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.
  • Deceiving consumers into enrolling in subscription programs: In 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, a violation of the Fair Credit Reporting Act, CPFB says.

Enforcement action Under the Dodd-Frank Act, CFPB may take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent orders, TransUnion and Equifax must:

  • Pay more than $17.6 million in total restitution to harmed consumers: TransUnion more than $13.9 million and Equifax almost $3.8 million. The companies must send notification letters about the restitution to affected consumers.
  • Truthfully represent the usefulness of credit scores sold: TransUnion and Equifax must clearly inform consumers about the nature of the scores they are selling to consumers.
  • Obtain the express informed consent of consumers: Before enrolling a consumer in any credit-related product with a negative option feature, TransUnion and Equifax must obtain the consumer's consent.
  • Provide an easy way to cancel products and services: TransUnion and Equifax must 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.
  • Pay $5.5 million in total penalties: TransUnion must pay $3 million to the Bureau's civil penalty fund and Equifax must pay $2.5 million.
More information from CFPB about credit scores can be found online.