WASHINGTON–The Consumer Financial Protection Bureau has taken action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers.
Between them, Chicago-based TransUnion and Atlanta-based Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
According to the CFPB, the companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB also 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.
“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray in a statement. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
According to the CFPB, 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 by:
- Deceiving consumers about the value of the credit scores they sold: In their advertising, the CFPB said 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 by TransUnion and Equifax were not typically used by lenders to make those decisions, the CFPB said.
- Deceiving consumers into enrolling in subscription programs: “In their 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’,” the CFPB said. “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.”
The CFPB said this billing structure, known as a “negative option,” was not clearly and conspicuously disclosed to consumers.
The CFPB said Equifax also violated the Fair Credit Reporting Act, which requires a credit reporting agency to provide a free credit report once every 12 months.
Under the consent orders, TransUnion and Equifax must:
- Pay more than $17.6 million in total restitution to harmed consumers: TransUnion must provide more than $13.9 million in restitution to affected consumers. Equifax must provide almost $3.8 million in restitution to affected consumers. The companies must send notification letters about the restitution to affected consumers, the CFPB said.
- Truthfully represent the usefulness of credit scores it sells: 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. Equifax must pay $2.5 million to the Bureau’s civil penalty fund.
The full text of the CFPB’s Consent Order against Equifax is here: http://files.consumerfinance.gov/f/documents/201701_cfpb_Equifax-consent-order.pdf
The full text of the CFPB’s Consent Order against TransUnion is here: http://files.consumerfinance.gov/f/documents/201701_cfpb_Transunion-consent-order.pdf