By Ray Birch
WASHINGTON—The CFPB’s lawsuit against TransUnion should be a “wake-up call” for credit unions to pay even closer attention to their vendor relationships, according to Geoff Bacino.
The former member of both the NCUA and FHFA boards said the Bureau’s action should cause credit unions to further scrutinize their partnerships and to go as far as looking at relationships vendors have with other organizations.
Bacino, partner at the consulting firm Bacino & Associates, said there is reputation risk involved, and even potentially legal risk.
“TransUnion should be that wake-up call,” said Bacino, who noted NCUA requires CUs to do vendor due diligence.
But beyond that, and what would likely fall outside NCUA’s purview, is just what can happen to a company’s reputation—and the ripple effects—when a regulator targets them, he added.
As CUToday.info reported, the Consumer Financial Protection Bureau 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 related to its credit scores and other credit-related products. The Bureau’s complaint also alleges TransUnion violated additional consumer financial protection laws.
‘Interconnected Ties’
“In today's business world you have a lot of interconnected ties, and while I would never say you should sever all ties with companies related to TransUnion, I do think it's one of those things where credit unions should be aware of who they are dealing with,” Bacino said. “They should be aware of the companies they work with that have ties with TransUnion.”
Bacino emphasized he is not sounding an alarm against working with companies connected with TransUnion, but the case suggests a preview of actios that may be taken by additional regulators, especially as the CFPB is under new Democratic control.
He noted that with the CFPB’s new leadership, Director Rohit Chopra, reporting to a president who is a Democrat, the agency will likely be increasing its number of enforcement actions, as was seen under the Bureau’s very first director, Richard Cordray.
A ‘Learning Lesson’
“To me, this TransUnion case with the CFPB is a learning lesson,” explained Bacino. “I think it's obvious that you're going to find more and more enforcements in the next two-and-a half years. Then, obviously what happens in the 2024 presidential election will have a big impact. And, frankly, the 2022 midterms in November will have an impact.
“For example, if the Republicans take back the Senate, what you'll find is probably more and more CFPB hearings,” he continued. “They're going to call the CFPB up to explain what they're doing. You saw the same thing happen when Richard Cordray was there. A Republican Senate called him up and had
him account for basically every dollar the agency spent. The agency whipsaws back and forth depending on who is in the White House.”
Geoff Bacino
As an example, Bacino noted that a number of credit unions work with credit score solution provider Savvy Money, which uses TransUnion data.
“Sometimes companies that work with companies that have been painted in a negative light by a regulator can get painted with that same brush,” he cautioned.
One Potential Precedent
Bacino did not rule out lawyers may find a way to pull credit unions into lawsuits due to their connection with a vendor whose reputation has come under scrutiny from regulators and is alleged to have harmed consumers. He cited as another example the wave of Americans with Disabilities Act (ADA) lawsuits suits that swept across the nation, impacting a number of credit unions a few years ago.
“We saw what happened,” recalled Bacino. “The ADA lawsuits were off the map, and they were run, I believe, by just one or two firms that specialized in that area. We might see, who knows, a new set of lawsuits related to regulator actions…The next thing you know the credit union is in court from some unintended consequences (from a vendor relationship). I think this is just a new concern that credit unions should stay on top of.”