The Consumer Financial Protection Bureau (CFPB) has ordered TransUnion and Equifax, two of the biggest credit bureaus, to pay a multi-million dollar fine for deceiving consumers about the usefulness and cost of credit scores they bought. The companies were accused of offering credit scores for sale that were falsely advertised as the same ones used by lenders. The companies were also accused of enrolling consumers into credit score programs and credit-related products advertised as “free” or “$1,” but were actually trials for an auto-renewing subscription that cost more than $200 a year.
The CFPB said the wrongful conduct had violated the Dodd-Frank financial reform law. CFPB Director Richard Cordray said in a statement, “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.” The cited issues occurred at TransUnion since July 2011 and at Equifax between July 2011 and March 2014.
The companies must pay more than $23.2 million in fines and restitution, including $5.5 million in fines and $17.6 million in refunds to customers, according to the regulatory agency. TransUnion will reimburse $13.93 million to consumers and pay a $3 million civil fine, while Equifax will reimburse $3.8 million and pay a $2.5 million civil fine. Both companies will also modify their marketing practices.
Neither Chicago-based TransUnion nor Atlanta-based Equifax admitted or denied wrongdoing. Equifax spokeswoman Ines Gutzmer said the company “does not believe it has violated any laws.” TransUnion spokesman David Blumberg commented, “Our consumer marketing has been clear and has complied with the law and other government guidance.”
Many lenders rely on credit scores from TransUnion, Equifax and rival Experian when lending money. FICO credit scores assign a score from 300-800 based on information contained in the credit history from each of the three major credit bureaus. Because the formula for calculating the credit scores are proprietary, credit bureaus have to pay a fee to FICO when they sell that credit score to consumers. Some companies have developed their own score to sell so they can keep more of the profits.
While it is possible to get one free credit report each year from each of the three bureaus at annualcreditreport.com, there is no completely free place to get your literal FICO credit score. CreditKarma and CreditSesame will give free credit scores that are very close to the FICO score, but a true FICO score is a more exact calculation involving all three bureaus’ reports. Some companies, like Discover, Capital One, and Walmart, give you access to your actual FICO credit score as a customer benefit.