CFPB Enters Into Consent Order with Credit Reporting Agency Over Alleged Misrepresentations

CFPA  •  CFPB  •  Credit Reporting  •  FCRA

On March 23, 2017, the Consumer Financial Protection Bureau (CFPB) announced that it had entered into a consent order with a California-based credit reporting agency (CRA) and its subsidiaries, resolving allegations that the CRA deceived consumers by misrepresenting that the credit score reports that it marketed to consumers were used by lenders in determining a consumer’s credit worthiness.

Between 2012 and 2014, the CRA allegedly advertised that the credit score it assigned to a consumer was the credit score lenders relied on in making credit decisions.  The CFPB alleged that the credit score consumers could purchase and review was, in fact, different than the score that lenders accessed through the CRA.  While the CRA did include a disclaimer that the credit score was for “educational” purposes, the CFPB alleged that the disclaimer was not conspicuous enough.  According to the CFPB, this practice constituted a deceptive act or practice in violation of Sections 1036(a)(1)(B) and 1031(a) of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1)(B).

The CFPB also alleged that the CRA violated the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-81x, and its implementing regulation (Regulation V, 12 C.F.R. § 1022.136(g)(1)).  That regulation prohibits CRAs from advertising their products to consumers through AnnualCreditReport.com until the consumer has exhausted their free annual credit report.  According to the CFPB, however, when a consumer stated that they wished to receive a free credit report through AnnualCreditReport.com from the CRA, they were then directed to the CRA’s website, where several different products were advertised, including credit monitoring and identity theft protection.

Under the terms of the consent order, the CRA agreed to pay a $3 million civil money penalty, inform consumers of the nature of and usefulness of their credit scores, and institute a compliance plan to ensure the terms of the consent order are followed.

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