CFPB Fines Experian $3 Million for Deceiving Consumers

The Consumer Financial Protection Bureau on Thursday fined Experian PLC $3 million, alleging that the leading credit-reporting firm misrepresented the credit scores it marketed to consumers, according to the Wall Street Journal.

On Thursday, the Journal reported that the CFPB said Experian claimed the credit scores it sold to consumers were the same ones lenders used to make credit decisions. In reality, these scores were generated for the purpose of being sold directly to consumers, the CFPB said. In some instances, there were significant differences between the credit scores the company provided to consumers and the credit scores lenders actually used. “As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness,” the agency said.

In addition to the fine, the CFPB ordered Experian to “truthfully represent” to customers how its credit scores are used and to put in place an effective compliance management system. The company confirmed it accepted the consent order, without admitting to any of the agency’s allegations. “The consent order addresses past products and marketing disclosure and does not reflect current marketing practices,” said Experian spokesman Gerry Tschopp.

The CFPB in recent months has been increasing its scrutiny of credit-reporting companies, whose practices could have significant impact on consumers’ ability to obtain credit to purchase homes, autos and other items—as well as the cost of that credit.  In January, two of Experian’s smaller rivals, Equifax Inc. and TransUnion, agreed to collectively pay more than $23 million over similar claims by the CFPB that they deceptively marketed and sold credit scores to consumers. Earlier this month, CFPB Director Richard Cordray urged the industry to improve the quality and accuracy of credit reports and to upgrade systems to resolve consumer complaints. Jace Farraez from the Bond, Botes & Woods Office in Jackson, Mississippi wrote a terrific blog on the CFPB’s effort to improve credit reporting.

The CFPB has also begun exploring ways to allow alternative data, such as rent and utility payments, to be used to calculate credit scores, a step that could allow millions of consumers who have no or insufficient credit histories to gain access to credit.

Companies are responding to the heightened pressure from regulators. The top three firms in the industry—Experian, Equifax and TransUnion—have decided to remove certain negative information, including tax liens and civil judgments, from credit reports to help improve scores for numerous consumers.

Click here for the full report from the CFPB.

 

Related Information

• How to File a Credit Report Dispute
• Basics of Improving Credit
• Equifax Ordered to Pay $18.6 million for Failing to Fix Credit Report