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The Consumer Financial Protection Bureau (CFPB) announced a settlement with TransUnion and Equifax last week for their violations of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. TransUnion and Equifax are 2 of the 3 largest consumer reporting agencies in the country.
The CFPB charged TransUnion and Equifax with violating the law by:
Selling worthless credit scores: TransUnion and Equifax told consumers that the credit scores they marketed and provided to them were the scores used by lenders to make credit decisions. The CFPB found that the scores sold by TransUnion and Equifax were not normally used by lenders to make credit decisions.
Enrolling consumers in unneeded subscription programs: TransUnion and Equifax told consumers that their credit scores and credit-related products were free or, in the case of TransUnion, cost only $1. The truth was that consumers received a free trial for a limited time (normally 7 or 30 days) and then were automatically enrolled in a subscription program. Consumers were then charged a monthly fee unless they unsubscribed. This “negative enrollment” was not disclosed to consumers like it should have been.
Failure to provide free credit report: The Fair Credit Reporting Act requires credit reporting agencies to provide a free credit report once every 12 months and to operate a central source – AnnualCreditReport.com – where consumers can get their report. Equifax didn’t do that. Instead, consumers had to view Equifax advertisements before they could get their reports from Equifax, a violation of the Fair Credit Reporting Act.
Thankfully, a few years ago, Congress passed the Dodd-Frank Act, which allows the CFPB to take action against companies that are taking unfair, deceptive, or abusive acts against consumers. TransUnion and Equifax recognized their wrongdoing and agreed to:
Pay more than $17.6 million back to affected consumers: TransUnion is going to refund $13.9 million to consumers who were deceived or cheated. Equifax is refunding $3.8 million to its customers. If you paid these companies any money, be on the lookout for a letter from them because TransUnion and Equifax are required to send affected consumers notification letters about the refunds that they are due.
Change their practices and tell the truth about the credit scores they sell: TransUnion and Equifax agreed to tell consumers about the nature of the scores they are selling to consumers. In other words, they have to tell folks that these are internally made up scores and not scores used by actual creditors.
Get permission before charging consumers: Before enrolling a consumer in any credit-related product with a negative enrollment feature, TransUnion and Equifax must obtain the consumer’s express consent.
Provide an easy way out: TransUnion and Equifax agreed to give consumers a simple, easy-to-understand way to get out of the monthly charges for the credit-related products and agreed to stop billing and collecting payments for any recurring charge when a consumer cancels.
Pay $5.5 million in total penalties: TransUnion must pay $3 million to the Bureau’s civil penalty fund. Equifax must pay $2.5 million to the Bureau’s civil penalty fund.