| The Consumer Financial Protection Bureau (CFPB) took action this week against Equifax and TransUnion for deceiving and luring customers into costly recurring payments and ordered the pair to pay more than $23 million in restitution and penalties.
“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” 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 bureau said that in their advertising, Equifax and TransUnion lead consumers to believe the credit scores they sold were the same scores lenders use to make credit decisions, when in fact they were not. The regulator singled out TransUnion’s VantageScores and Equifax’s own proprietary credit score, neither of which are actually used by lenders.
The two credit reporting agencies also lured customers into costly subscription plans, the bureau said. TransUnion and Equifax advertised free or very cheap credit scores and products (in TransUnion’s case, for $1), but these were actually free trials of seven days or 30 days. If customers did not cancel during the trial period, they were enrolled in a subscription plan that often cost $16 or more per month.
“This billing structure, known as a ‘negative option,’ was not clearly and conspicuously disclosed to consumers,” the CFPB said.
For this, the regulator accused both agencies of violating the Dodd-Frank Act. The CFPB said that Equifax also violated the Fair Credit Reporting Act by requiring consumers to view Equifax advertisements before they could get their free annual credit report.
The CFPB said both agencies must truthfully represent the credit scores and products they sell and obtain express consent before enrolling customers in subscription plans. TransUnion will pay more than $13.9 million in restitution to customers and $3 million in civil penalties to the bureau, and Equifax will pay almost $3.8 million in restitution and $2.5 million in penalties.
