On January 3, 2017, the Consumer Financial Protection Bureau (CFPB) took action against Equifax, Inc., TransUnion, and their subsidiaries for allegedly deceiving consumers about the cost and usefulness of credit scores they sold to consumers.

TransUnion sold consumers credit scores based on a model from VantageScore Solutions, LLC. Equifax sold consumers credit scores that were based on its proprietary model. According to the CFPB, neither the VantageScores nor the scores based on Equifax’s proprietary system are typically used by lenders in making credit decisions about consumers.

The CFPB alleges that TransUnion and Equifax violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act by:

  • Falsely representing to consumers that the credit scores they sold to them were the same scores used by lenders to make credit decisions, even though those scores were not typically used by lenders; and
  • Falsely claiming that consumers’ credit scores and other credit-related products were free (or only $1 in the case of TransUnion’s credit scores), despite the fact that consumers were automatically enrolled in a subscription program that charged a monthly fee unless consumers cancelled during the trial period.

The CFPB alleges that Equifax also violated the Fair Credit Reporting Act (FCRA), by requiring consumers to view Equifax advertisements prior to receiving their “free” credit report (which they are entitled to under the FCRA).

In order to resolve the alleged violations, TransUnion and Equifax entered into consent orders with the CFPB. Pursuant to the consent orders, TransUnion and Equifax must:

  • Pay a combined $17.6 million in restitution to consumers ($13.9 by TransUnion and $3.8 by Equifax);
  • Clearly inform consumers about the true nature of the credit scores that they sell to consumers;
  • Obtain consent from consumers prior to enrolling them in a credit-related product that requires a “negative option feature” (i.e., a program that automatically enrolls a consumer and charges them, unless the consumer opts out);
  • Provide consumers with an easy and simply way to cancel any purchase of a credit-related product and stop charging consumers for those products once they are cancelled; and
  • Pay a combined $5.5 million in total penalties ($3 million by TransUnion and $2.5 million by Equifax).

To view the TransUnion consent order click here.

To view the Equifax consent order click here.