Experian Fined $3M, Accused Of Misleading Consumers About Usefulness Of Credit Scores

Two months after federal regulators fined two of the nation’s largest credit reporting agencies — Equifax and TransUnion — $23 million for misleading consumers about the cost and usefulness of credit monitoring services, the Consumer Financial Protection Bureau has announced a $3 million settlement with Experian over allegations that the credit agency misled consumers about the usefulness of the credit scores available for purchase.

The CFPB announced today that Experian and its subsidiaries must pay a $3 million civil penalty and revamp its business practices to resolve allegations that it misled consumers into paying for credit monitoring services and products.

Credit scores are often used by lenders to predict a consumer’s payment behavior as a way to determine if they should extend credit. However, there is no single credit scoring system used by all lenders for all types of loans.

According to the CFPB’s consent order [PDF], from at least 2012 to 2014 Experian deceived consumers about the use of the credit scores it sold — known as PLUS Scores — advertising that the scores were the same as those used by lenders to make credit decisions.

For example, the company told prospective customers that, “Lenders review your credit information and so should you. Check your credit score to know what to expect including what factors may be affecting your credit.”

However, the CFPB claims that wasn’t the case. In fact, the Bureau found that 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 complaint alleges.

The CFPB also alleges that until March 2014, Experian posted its advertisements on AnnualCreditReport.com, a violation of the Fair Credit Reporting Act.

In addition to paying a $3 million fine, the CFPB’s consent order requires Experian to truthfully represent the usefulness of credit scores and develop a plan to make sure its advertising practices are in compliance with federal consumer laws.

Experian tells Consumerist in a statement that the CFPB’s order addresses past products and marketing disclosures and does not reflect current marketing practices.

“While we do not believe our practices violated the law and did not admit to any of the allegations, in the interest of moving our business forward and staying focused on delivering an exceptional product and service experience to our clients and consumers, Experian has accepted the consent order,” the company said. “Experian will execute all actions directed by the CFPB; except for limited changes, our current marketing practices are already compliant with the order.”