CFPB Hits Experian With $3 Million Penalty for Consumer Deception
The CFPB took action against Experian and its subsidiaries for deceiving consumers about the use of credit scores sold to consumers. The agnecy ordered Experian to pay a $3 million penalty.
The bureau also ordered the Costa Mesa, Calif.-based Experian to truthfully represent how its credit scores are used. Experian claimed the credit scores it marketed and provided to consumers were used by lenders to make credit decisions.
“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” CFPB Director Richard Cordray said. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws.
Per the consent order, Experian must:
- Pay a civil money penalty of $3 million to the Bureau’s Civil Penalty Fund.
- Inform consumers about the nature of the scores it sells to consumers.
- Develop and implement a plan to make sure its advertising practices relating to credit scores and on webpages comply with federal consumer laws and the terms of the CFPB’s consent order.
According to the CFPB, Experian developed its own proprietary credit scoring model, referred to as the “PLUS Score,” which it applied to information in consumer credit files to generate a credit score it offered directly to consumers. Lenders do not use the PLUS Score, an educational score, for credit decisions.
“From at least 2012 through 2014, Experian violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by deceiving consumers about the use of the credit scores it sold,” the CFPB said in a statement. “In its advertising, Experian falsely represented that the credit scores it marketed and provided to consumers were the same scores lenders use to make credit decisions. In fact, lenders did not use the scores Experian sold to consumers.”
In some instances, there were significant differences between the PLUS Scores that Experian provided to consumers and the various credit scores lenders actually use. As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness.
The CFPB also said Experian also violated the Fair Credit Reporting Act, which requires a credit reporting company to provide a free credit report once every twelve months and to operate a central source, AnnualCreditReport.com, where consumers can obtain their report. Until March 2014, consumers getting their report through Experian had to view Experian advertisements before they got to the report. This violates the Fair Credit Reporting Act prohibition of such advertising tactics.