CFPB Fines Equifax and TransUnion

CFPB Fines Equifax and TransUnion

CFPB is a bureau that is responsible for protecting consumers from any credit fraud or data theft. According to Federal Trade Commission, there were nearly 1.7 million cases recorded of identity theft in 2021. To handle these cases, there are some laws and bureaus that protect people from data theft. One such bureau is Consumer Federal Protection Bureau.

Did you know that CFPB charged some of the most popular credit bureaus? Yes. Though Equifax and TransUnion are some of the revered credit bureaus of the industry, CFPB fined those bureaus for violating their rules. This article will let you know more about the CPFB’s fine on Equifax and TransUnion

Credit Scores

Think you have just 1 credit score? How about 3 credit scores? If you believed either of these previous statements to be true then you may be in for a bit of a shock. The truth is that you actually have hundreds of different credit scores, and that is no exaggeration.

Credit scores are products and like many products, they are created and sold by competing companies. The primary 2 companies that create credit scoring models are FICO and VantageScore. In addition to competing models, there are numerous credit scores that are also created for different purposes. For example, there are auto industry-adjusted FICO scores, mortgage-adjusted FICO scores, bankcard-adjusted FICO scores, and general-purpose FICO scores.

On top of the different brands and different types of credit scores, there are even different versions or generations of scores as well. The result, as mentioned, is hundreds of different credit scores which are currently commercially available. Some scores are used by mortgage lenders, some are used by auto lenders, and some are only used by consumers themselves.

What does all of this have to do with 2 of the major credit bureaus getting fined by the CFPB? Keep reading. It will all make sense soon.

There are numerous credit-reporting bureaus around the world. Among them, Experian, TransUnion, Equifax, and CRIF Highmark are the popular credit bureaus. Most of the loan vendors depend on one of these bureaus to consider the loan applications of the users. These bureaus evaluate the creditworthiness of the consumers and produce a report to the loan providers. This report will contain financial information about the users based on which the credit scores are evaluated. 

What Is CFPB?

The Consumer Federal Protection Bureau is the federal agency of the United States that is responsible for protecting consumers against unauthorized data pulls and identity thefts. Though the credit bureaus are allowed to collect information on the consumers. There are some rules and regulations. The bureaus cannot scrape the data that are restricted. 

CFPB Fined Equifax and TransUnion

Credit reporting giants Equifax and TransUnion  found themselves in hot water with the Consumer Financial Protection Bureau (CFPB). The 2 companies were collectively fined $5.5 million plus ordered to pay over $17.6 million to consumers in restitution. The misdeeds? According to the CFPB the credit bureaus deliberately “deceived consumers about the usefulness of the credit scores they marketed.” Essentially, the CFPB took issue with the fact that Equifax and TransUnion did not clearly disclose that the credit scores they sold to consumers were not the FICO credit scores which are typically used by lenders whenever someone applies for new financing.

The CFPB also took issue with the 2 credit bureaus for “lur[ing] consumers into expensive recurring payments with false promises.” According to the CFPB, both TransUnion and Equifax falsely represented the credit scores they sold as “free” or “only $1.” However, consumers actually only received that free or $1 trial for somewhere between 7-10 days before being automatically enrolled in a monthly subscription program for credit monitoring services. The CFPB believes that the billing structure “was not clearly and conspicuously disclosed to consumers.”

Do All Scores Have Value?

In light of the recent CFPB ruling and with a large number of available credit scores on the market you might wonder whether or not it is a waste of time to check any credit score other than your “official” FICO score. Not so fast. There is actually no such thing as an official credit score at all.

Lenders do not even all use the same credit scores. As a result, if you were to have your credit scores pulled by 2 different lenders today you would almost certainly see 2 different sets of credit scores returned. (Remember, even if 2 different lenders are both pulling your FICO credit scores they probably are not checking the exact same version of those scores.) The scores both lenders checked might be similar, but it is highly unlikely that both sets of scores would be identical.

All credit scores actually do have value and can be useful tools as long as you understand their limitations and how they work. You should not expect the credit scores you pull online (whether they were free or whether you paid to access them) to match the credit scores your lender will pull the next time you apply for a mortgage. In fact, the 2 sets of scores could be drastically different.

However, if you are consistently using those online credit scores to track your progress as you work to improve your credit then those scores can certainly be valuable and beneficial to you. If the online scores you are checking are moving upward then your FICO credit scores will most likely be doing the same.

Frequently Asked Questions

1. Did CFPB fine Equifax and Trans Union?

Yes, CFPB fined Equifax and TransUnion around 2011 as these companies deceived people in the names of subscriptions and other free credit reporting services. 

2. What is the role and responsibility of the CFPB?

The CFPB supervises the loan vendors, banks, and loan providers. This bureau ensures fairness and transparency of the loan providers and the credit reporting agencies. 

3. Why CFPB fined Equifax and TransUnion?

The agency charged the company for deceiving people in name of a free trial and a $1 trial. After the period of 30 days, the customers are automatically enrolled in the paid subscription plan. 

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This article clearly explains the rights of the users. If you are a credit consumer, know that there is a bureau called Consumer Federal Protection Bureau to protect you. This law regulates the process of credit bureaus and helps you by ensuring the authenticity of the credit bureaus and monitoring the fairness of the loan providers. The Credit Pros is a credit repair company functions abiding the laws of consumer protection act. 

For more information, call us at  1-800 411-3050