Consumer Finance Insights
January 26, 2017

CFPB Issues Consent Order Against Equifax and Transunion for Deceptive Practices

On January 3, 2017, the Consumer Financial Protection Bureau (CFPB) entered into consent orders with credit reporting agencies Equifax and TransUnion, requiring that they pay a total of over $17.6 million in restitution to consumers and pay an additional total money penalty of $5.5 million.  The consent orders concern the CFPB’s allegations that Equifax and TransUnion violated the Consumer Financial Protection Act of 2010 (CFPA) by falsely representing (1) that the credit scores they sold to consumers were the same scores that lenders use to determine creditworthiness; and (2) that the credit scores were free, when in fact a consumer who signed up for a free trial automatically received a subscription and was charged a recurring monthly fee unless the consumer cancelled the subscription.  The CFPB also alleged that Equifax violated the Fair Credit Reporting Act (FCRA) by placing advertisements on web pages that consumers had to view before accessing their free annual credit report.  Specifically, the consent orders assert that:

  • Equifax and TransUnion represented to consumers, expressly or impliedly, that the credit scores available for purchase were the same scores that lenders use to make credit decisions, when lenders actually are unlikely to use the credit scores sold by Equifax and TransUnion.  The CFPB states in its consent order that, in reality, there are often “significant and meaningful differences” between the credit scores Equifax and TransUnion sold to consumers and the credit scores that lenders use to determine creditworthiness.
  • Equifax and TransUnion advertised that consumers could access “free” credit scores when in fact consumers received a seven- or thirty-day free trial, after which they were automatically enrolled in a monthly paid subscription unless they affirmatively cancelled during the free trial period.
  • Equifax violated FCRA’s requirement that credit reporting agencies provide one free credit report every twelve months to a consumer upon request when it placed advertisements on its web pages that consumers had to click through before obtaining their credit report.  The CFPB cited Regulation V as providing that credit reporting agencies may not force consumers to view advertisements until after the consumer has obtained his or her credit report.

These consent orders serve as important reminders to credit reporting agencies to clearly inform consumers about the nature of the products they are selling and to strictly comply with FCRA’s requirements.  More generally, the orders should remind financial services providers to ensure that their advertisements are entirely accurate and to be aware of requirements to obtain consumer consent before enrolling consumers in certain programs.

The CFPB’s press release discussing the orders is available here.