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CFPB Fines Credit Reporting Agencies for Deceptive Practices

Fri 06 Jan, 2017  /  by   /   Client Alerts

01/06/17 – The Consumer Financial Protection Bureau (CFPB) has taken action against two major credit reporting agencies and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers.

As two of the nation’s three largest credit reporting agencies, the companies collect credit information, including a borrower’s payment history, debt load, maximum credit limits, names and addresses of current creditors, and other elements of their credit relationships. These generate credit reports and scores that are provided to businesses. Through their subsidiaries, the companies also market, sell, or provide credit-related products directly to consumers, such as credit scores, credit reports, and credit monitoring.

The CFPB’s investigation determined that both companies violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection 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. In fact, the scores sold by the companies to consumers were not typically used by lenders to make those decisions. The CFPB also took issue with the companies for enrolling consumers in and making “false” promises about credit-related products with recurring payments.

Under the consent order, the companies are required to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services, obtain the express informed consent of consumers, and provide an easy way to cancel products and services. Between them, the companies must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB’s Civil Penalty Fund.

CFPB Press Release, Consent Order 1, Consent Order 2.