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From Banking and Finance Law Daily, January 3, 2017

Credit reporting companies to pay $22.5 million for deceptive marketing practices

By John M. Pachkowski, J.D.

The Consumer Financial Protection Bureau has entered into separate consent orders with Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. As part of its enforcement actions against the two credit reporting companies, the CFPB also found that Equifax and TransUnion lured consumers into costly recurring payments for credit-related products with false promises.

It should be noted that prior to the CFPB’s announcement of the consent orders, TransUnion informed the investment community that the bureau’s enforcement action was imminent. In a Dec. 29, 2016, 8-K filed with the Securities and Exchange Commission, TransUnion stated it will incur a one-time charge of approximately $19.4 million in the fourth quarter of 2016.

Specifically, the CFPB found that, from at least July 2011 until March 2014, both TransUnion and Equifax violated the Dodd-Frank Act by falsely representing that the credit scores they marketed and provided to consumers were the same scores lenders typically use to make credit decisions. The bureau also claimed that the two credit reporting companies falsely claimed that their credit scores and credit-related products were free or, in the case of TransUnion, cost only "$1." Finally, the CFPB also alleged that Equifax violated the annual free credit report provisions of the Fair Credit Reporting Act by requiring consumers to view Equifax advertisements before receiving their free credit reports.

Under the terms of its consent order, Equifax, along with its subsidiary Equifax Consumer Services, LLC, must provide almost $3.8 million in restitution to affected consumers. The consent order for TransUnion, and its subsidiaries TransUnion Interactive, Inc., and TransUnion LLC, requires payment of $13.9 million in restitution to affected consumers.

The consent orders also require the credit reporting companies to:

  • clearly inform consumers about the nature of the scores they are selling to consumers;
  • provide consumers a simple, easy-to-understand way to cancel the purchase of any credit-related product;
  • stop billing and collecting payments for any recurring charge when a consumer cancels; and
  • pay $5.5 million to the CFPB’s Civil Penalty Fund.

Commenting on the consent orders, CFPB Director Richard Cordray stated, "TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises. Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them."

Finally, to assist consumers to better understand information in their credit reports and credit scores, the CFPB posted an entry on its blog offering key tips they should keep in mind.

Companies: Equifax Consumer Services, LLC; Equifax, Inc.; TransUnion; TransUnion Interactive, Inc.; TransUnion LLC

MainStory: TopStory CFPB DoddFrankAct EnforcementActions FairCreditReporting UDAAP

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