Consumer Finance Insights
January 5, 2017

CFPB Enters Consent Orders with Credit Reporting Agencies Over Allegedly Deceptive Credit Scores

On January 3, 2017, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into two consent orders, available here and here, with two national credit reporting agencies over allegations that the agencies violated the Consumer Financial Protection Act by misrepresenting how lenders use certain credit scores that the agencies sell to consumers. The CFPB also alleged that the agencies enrolled consumers in monthly credit monitoring subscription services without obtaining consumers’ informed consent.

According to the CFPB, the agencies used a third-party affiliate company to produce consumer credit scores, which the agencies market and sell to consumers. This affiliate company in turn used a credit score modeling system that is different than the credit scoring models most often used by lenders. As a result, the credit scores marketed and sold by the agencies were allegedly different than the credit scores used by lenders when making credit decisions. The agencies, however, marketed these credit scores as identical to the scores used by lenders in making credit decisions. The CFPB faulted the agency for “implicitly representing” in marketing advertisements that the credit scores they provided were the same as those used by lenders in making credit decisions. Although the advertisements included disclosures stating that lenders may use different credit scoring models, the CFPB alleged the disclosures were not sufficiently clear and conspicuous because they were located at the bottom of webpages in fine print.

In addition, the CFPB alleged the agencies offered deceptive and misleading credit monitoring services. The agencies allegedly offered free or $1 credit scores or credit reports, but failed to adequately disclose that if consumers did not cancel after a seven-day trial period, the agencies automatically enrolled them in a credit monitoring service that cost $16.99 per month.

Under the terms of the consent orders, the agencies must pay a total of $17.6 million in restitution to affected consumers and $5.5 million in civil penalties. The agencies must also reform their disclosure practices and obtain express consent from a consumer before enrolling the consumer in any monthly subscription service.

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