WASHINGTON–The Consumer Financial Protection Bureau has assessed a $3-million civil penalty against Experian and its subsidiaries for deceiving consumers about the use of credit scores it sold to consumers.
According to the CFPB, Experian claimed the credit scores it marketed and provided to consumers were used by lenders to make credit decisions, when in fact, lenders did not use Experian’s scores to make those decisions.
The CFPB also ordered Costa Mesa, Calif.-based Experian to truthfully represent how its credit scores are used.
“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” said CFPB Director Richard Cordray. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”
The CFPB said Experian developed its own proprietary credit scoring model, referred to as the “PLUS Score,” which it applied to information in consumer credit files to generate a credit score it offered directly to consumers. The PLUS Score is an “educational” credit score and is not used by lenders for credit decisions, the agency said.
“From at least 2012 through 2014, Experian violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by deceiving consumers about the use of the credit scores it sold,” the CFPB said in a statement. “In its advertising, Experian falsely represented that the credit scores it marketed and provided to consumers were the same scores lenders use to make credit decisions. In fact, lenders did not use the scores Experian sold to consumers. In some instances, there were significant differences between the PLUS Scores that Experian provided to consumers and the various credit scores lenders actually use. As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness.”
Experian also violated the Fair Credit Reporting Act, which requires a credit reporting company to provide a free credit report once every twelve months and to operate a central source – AnnualCreditReport.com – where consumers can obtain their report, according to the CFPB. Until March 2014, consumers getting their report through Experian had to view Experian advertisements before they got to the report. This violates the Fair Credit Reporting Act prohibition of such advertising tactics, the CFPB said.
The CFPB order also requires Experian to put into place an effective compliance management system.