On March 23, 2017, the CFPB announced in a press release that it had entered into a consent order with Experian to resolve allegations that the credit reporting agency had misrepresented the credit scores it marketed and sold to consumers. Under the terms of the consent order, Experian will pay a civil money penalty of $3 million. In addition, the CFPB ordered Experian to “truthfully represent” to customers how its credit scores are used and required it to implement an effective compliance management system.
Experian is one the nation’s three largest credit reporting agencies. Experian markets, advertises, sells, offers, and provides credit scores, credit reports, credit monitoring, and other related products to consumers and third parties.
According to the CFPB, Experian developed its own proprietary credit scoring model, called the “PLUS Score.” Experian’s PLUS Scores are “educational” credit scores, designed to educate consumers on their credit status. According to the CFPB, lenders often rely on a consumer’s credit score when deciding whether to extend credit, but the so-called educational credit scores are rarely, if ever, used by lenders.
According to the consent order, the Bureau alleged that it found numerous instances between 2012 and 2014 that Experian’s advertising implicitly represented that the PLUS Scores it marketed and sold to consumers were the same scores lenders use to make credit decisions. For example, an Experian ad stated: “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.” Another ad read: “See the same type of information lenders see when assessing your credit . . .”
The CFPB alleged 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, the Bureau claimed that Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness.
The consent order gives a subtle nod to a disclosure that Experian included in its advertising for the PLUS Score, which stated: “Calculated on the PLUS Score model, your Experian Credit Score indicates your relative credit risk for educational purposes and is not the same score used by lenders.” The Bureau concluded, however, that the disclosure was not sufficiently conspicuous.
In addition to alleged violations of the Dodd-Frank Act, the consent order also contains claims that Experian violated the Fair Credit Reporting Act, which requires a credit reporting company to provide a free credit report once every twelve months. According to the CFPB, Experian placed Experian advertisements on webpages that consumers access to obtain their free annual report. This practice violates the Fair Credit Reporting Act prohibition of such advertising tactics.
This consent order comes not long after the Bureau took action against Equifax and TransUnion, the other two major credit reporting agencies that comprise the “big three.” In January 2017, the CFPB fined the companies a collective $23 million over similar claims of deceptive marketing practices in connection with the sale of credit scores and services to consumers.