CFPB Fines Credit Reporting Agency $3 Million for Deceiving Consumers about Credit Scores

 credit-score

Written By ESR News Blog Editor Thomas Ahearn

The Consumer Financial Protection Bureau (CFPB) has ordered one of the nation’s three largest credit reporting agencies, Experian, to pay a civil penalty of $3 million for deceiving consumers about the use of credit scores it sold to them, according to a report on the CFPB website.

The CFPB consent order requires Experian to truthfully represent how credit scores are used after claiming the credit scores it marketed to consumers were used by lenders to make credit decisions when, in fact, lenders did not use Experian’s scores to make those decisions.

“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” said CFPB Director Richard Cordray. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”

The CFPB is authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act to take action against institutions engaged in unfair, deceptive, or abusive acts or practices that violate federal consumer financial laws. Under the consent order, Experian must:

  • Pay a civil money penalty of $3 million to the CFPB’s Civil Penalty Fund.
  • Inform consumers about the nature of the credit scores sold to consumers.
  • Develop and implement a plan to make sure its advertising practices relating to credit scores and on Internet webpages that consumers access through AnnualCreditReport.com comply with federal consumer laws and the terms of the CFPB’s consent order.

Experian also violated the federal Fair Credit Reporting Act (FCRA), which requires a credit reporting agency to provide a free credit report once every twelve months and to operate a central source – AnnualCreditReport.com – where consumers can obtain their report.

“Credit scores” are numerical summaries designed to predict consumer payment behavior in using credit. Many lenders and other commercial users consider these scores when deciding whether to extend credit. No single credit score or credit scoring model is used by every lender.

Based in Costa Mesa, California, Experian markets, advertises, sells, offers, and provides credit scores, credit reports, credit monitoring, and other related products to consumers and third parties. The full text of the CFPB’s Consent Order against Experian is available here.

As reported by ESR News in January 2017,  the CFPB ordered TransUnion and Equifax, Inc. to pay a total of more than $17.6 million in restitution to consumers, along with fines totaling $5.5 million to the CFPB, for deceiving consumers about credit scores.

Under Consent Orders against the two other major credit reporting agencies along with Experian, TransUnion was ordered to pay more than $13.9 million in restitution to affected consumers while Equifax was ordered pay almost $3.8 million in restitution to affected consumers.

ESR News also reported in March 2017 that the CFPB released a special report detailing problems in the credit reporting industry and outlines actions the CFPB has taken to fix data accuracy, repair the broken dispute process, and clean up information being reported.

The Consumer Financial Protection Bureau (CFPB) helps consumer finance markets work by making rules more effective, by enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.

More Information about Credit Reports and the CFPB from ESR

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