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Credit Score Companies Scam Consumers, Fined Over $20M

By George Khoury, Esq. on January 04, 2017 | Last updated on March 21, 2019

The credit reporting companies Equifax and TransUnion were fined over $20 million as a result of an order issued by the Consumer Financial Protection Bureau (CFPB). The CFPB found that both credit reporting companies had deceived customers by tricking them into signing up for recurring payment subscription-like services, as well as lied about the cost of their services. Additionally, the CFPB found that the companies misled consumers into thinking that the reports and scores provided were more useful than they actually were by falsely claiming that they were the same reports considered by lenders.

Equifax also violated a provision of the Fair Credit Reporting Act (FCRA) which required them to provide a free credit report once every 12 months. The company did provide it, but required consumers to view their advertising prior to receiving the report, which is a violation of the FCRA (which would have allowed advertising after receiving the report).

Who Gets the Fine?

The fine issued by the CPFB is to be split between the CPFB and consumers. The bulk of the fines, over $17 million, are to go to consumers in restitution for paying for services that should not have been paid for. Equifax is only responsible for $3.8 million of the $17+ million, while the rest is attributed to TransUnion. A separate $5.5 million in fines will go directly to the CFPB, with TransUnion paying $3 million, and Equifax paying the rest.

Consumers that were affected by the deceptive practices should receive a notice in the mail directly from the companies notifying them of their right to restitution and what to do to claim it.

The Consumer Credit Industry

The consumer credit industry is dominated by the big three credit reporting companies: TransUnion, Equifax, and Experian. The three companies provide credit histories and credit scores to consumers and businesses. For businesses, knowing a consumer's credit history is important not just when deciding when and how much credit is prudent to provide to a consumer, but also when making hiring decisions.

Additionally, banks and lenders look to a consumers credit history when deciding a consumer's interest rate, and whether or not the consumer can even qualify for a loan, mortgage, or other line of credit.

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