Equifax and TransUnion have agreed to pay a multi-million dollar settlement to resolve allegations of misleading consumers and luring them into paying monthly fees for products related to credit. The Consumer Financial Protection Bureau (CPFB), according to a recent ABA Journal report, announced consent orders against both companies earlier this year. Neither company has admitted any wrongdoing. That being said, both announced changes regarding many of the activities targeted by the CFPB’s consent orders. Between the two, TransUnion and Equifax will have to pay more than $17.6 million in restitution to consumers as well as fines to the CPFB in the amount of $5.5 million.
What Credit Reporting Agencies Do
Equifax and TransUnion are two of the nation’s three largest credit reporting agencies.
Both agencies collect consumer credit information. Data includes debt load, maximum credit card limits, a borrower’s payment history, names and addresses of current creditors, and other credit relationship information. Their subsidiaries sell, market, or provide credit-related products directly to consumers. This includes credit reports, credit monitoring, and credit scores.
The numerical summary translated into a credit score is used to predict a consumer’s payment behavior regarding credit. Commercial users and lenders depend on this score, in part, when deciding whether or not to extend credit.
The CFPB’s Allegations
TransUnion and Equifax were charged with violating the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act since at least July 2011 and between July 2011 and March 2014, respectively.
The CFPB alleges Equifax and TransUnion falsely portrayed the credit scores marketed to consumers as the same ones that are used by lenders for making a decision on whether or not to extend credit. The truth is lenders use multiple credit scores – and they often differ by target industry and provider – according to the consent decrees.
Both companies also marketed free or $1 credit scores that, according to the CFPB, were actually free trials that automatically enrolled those who signed up in a subscription program. Unless the consumer affirmatively canceled, he or she would be a monthly fee of $16 or more. This fee was not clearly or conspicuously disclosed.
Equifax is also accused of violating the Fair Credit Reporting Act (FCRA). The FCRA mandates that a credit reporting agency provide consumers a free credit report once every 12 months. It also requires the agency to use a central source where consumers can obtain their report. Until 2014, consumers getting their credit report had to first view Equifax advertisements, a violation of the law, which only allows advertisements after a consumer has received his or her report.
Consumer Protection Help
If you or someone you know believes they have been a victim of Equifax or TransUnion’s illegal practices, contact a knowledgeable local attorney today to learn about your rights under the law.