WASHINGTON–The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against TransUnion, two of its subsidiaries, and longtime executive John Danaher for allegedly violating a 2017 law enforcement order.
According to the Bureau, the order was issued to stop the company from engaging in deceptive marketing, regarding its credit scores and other credit-related products.
“After the order went into effect, TransUnion continued its unlawful behavior, disregarded the order’s requirements, and continued employing deceitful digital dark patterns to profit from customers,” the CFPB said.
The Bureau’s complaint also alleges that TransUnion violated additional consumer financial protection laws.
‘Out of Control’
“TransUnion is an out-of-control repeat offender that believes it is above the law,” said CFPB Director Rohit Chopra. “I am concerned that TransUnion’s leadership is either unwilling or incapable of operating its businesses lawfully.”
In announcing its suit, the CFPB noted Chicago-based TransUnion collects information on 200 million individuals, and the company claims to profile “nearly every credit-active consumer in the United States.” TransUnion reported $3 billion in revenue for 2021.
‘Credit reporting agencies are entrusted with generating accurate credit reports to help banks and other lenders determine an applicant’s creditworthiness,” the Bureau said. “However, based on the nearly 150,000 consumer complaints about TransUnion that the Bureau received in 2021 alone, TransUnion has struggled to maintain that trust.”
2017 Law Enforcement Order
According to the CFPB, on Jan. 3, 2017, the CFPB settled charges with TransUnion and its subsidiaries for deceptively marketing credit scores and credit-related products, including credit monitoring services. As part of the settlement, TransUnion agreed to pay $13.9 million in restitution to victims and $3 million in civil penalties. TransUnion and its subsidiaries also agreed to a formal law enforcement order that, among other things, required the credit reporting giant to warn consumers that lenders are not likely to use the scores they are supplying, obtain the express informed consent of customers for recurring payments for subscription products or services, and provide an easy way for people to cancel subscriptions, the CFPB said.
The order was binding on the company, its board of directors, and its executive officers.
The Bureau reported that in October 2018 it commenced an examination of TransUnion, and in May 2019 its examiners informed TransUnion that it was violating multiple requirements of the order.
“In these instances, companies typically work constructively with the CFPB to make quick fixes and come into compliance,” the Bureau said. “However, in June 2020, CFPB informed TransUnion that it was still violating the order and engaged in additional violations of law.”
‘Digital Dark Patterns’
According to the CFPB, TransUnion has been using “digital dark patterns,” which are “hidden tricks or trapdoors companies build into their websites to get consumers to inadvertently click links, sign up for subscriptions, or purchase products or services.”
Dark patterns can complicate or hide information, such as making it difficult for consumers to cancel a subscription service, the CFPB said.
As alleged in the complaint, TransUnion used an array of dark patterns to trick people into recurring payments and to make it difficult to cancel them.
“For example, under federal law, Americans are entitled to a free credit report from TransUnion through annualcreditreport.com,” the Bureau stated. “TransUnion asked consumers to provide credit card information that appeared to be part of an identity verification process. TransUnion then integrated deceptive buttons into the online interface that gave the impression that the consumer could also access a free credit score in addition to viewing their free credit report. In reality, clicking this button signed consumers up for recurring monthly charges using the credit card information they had provided.”
The Bureau said the only indication in the enrollment process that consumers were making some sort of purchase was through a fine print, low contrast disclosure, located off to the side of the enrollment form. The disclosure is inside an image that can take up to 30 seconds longer to load than the rest of the material in the form.
“This dark pattern triggered thousands of complaints,” the CFPB said. “For consumers looking for a way out of their subscriptions, TransUnion not only failed to offer a simple mechanism for cancellation, it actively made it arduous for consumers to cancel through clever uses of font and color on its website.”
Charges Against Executive
Meanwhile, the CFPB said that since 2004 John T. Danaher served as a top executive of TransUnion Interactive, TransUnion’s unit that sold products and services directly to consumers and contributes roughly 18% of TransUnion’s overall revenue. According to filings with the Securities and Exchange Commission, since 2016, Danaher received over $10 million from the sale of TransUnion stock shares that were acquired by him as part of his compensation package, the Bureau said.
“Danaher was bound by the 2017 order, but he repeatedly failed to ensure that TransUnion took certain required steps and refrained from prohibited conduct,” the CFPB is alleging. “In fact, Danaher determined that complying with the order would reduce the company’s revenue, so he created a plan to delay or avoid having to implement the order.
“Among other things, Danaher determined that using an affirmative selection checkbox, required by the order to limit unintended subscription enrollments, would result in fewer enrollments into TransUnion’s Credit Monitoring service,” the Bureau continued. “Danaher instructed TransUnion Interactive to cease using the checkbox, which led to millions of enrollments.”
Danaher recently separated from TransUnion.
The Enforcement Action
According to the Bureau, repeat offender law enforcement is a top priority for the CFPB. The CFPB said it is filing a lawsuit in federal court charging TransUnion and John Danaher with multiple violations of law.
Specifically, the Bureau’s lawsuit alleges that:
- TransUnion and John Danaher flouted a formal law enforcement order: “TransUnion and Danaher flouted the terms of the CFPB’s 2017 order. Rather than comply with the terms, the company continued to engage in deceptive conduct in its marketing and sale of credit-related products, it failed to provide required disclosures to make its marketing not misleading, and it failed to assemble and review consumer information and implement appropriate improvements to advertisements. Danaher’s actions also make him liable under the law.”
- TransUnion deceived customers through digital dark patterns. “For its subscription products, TransUnion relied on digital dark patterns from beginning to end of the TransUnion customer experience.
- TransUnion cheated customers through the marketing and sale of its credit-related products: TransUnion misrepresented numerous aspects of its products, services, and subscription plans, including that its credit monitoring service was a standalone credit score or credit report.
Additional Allegations
The lawsuit alleges that TransUnion violated the Consumer Financial Protection Act of 2010 by failing to implement requirements of the Bureau’s 2017 order and by engaging in deceptive acts and practices. The CFPB also alleges that TransUnion violated Regulation V, which implements the Fair Credit Reporting Act, and the Electronic Fund Transfer Act.
The CFPB said it is seeking monetary relief for consumers, such as restitution or return of funds, disgorgement or compensation for unjust gains, injunctive relief, and civil money penalties. The complaint is not a final finding or ruling that the defendants have violated the law.