When is a credit score not a credit score?
WASHINGTON – March 27, 2017 – The Consumer Financial Protection Bureau (CFPB) took action against Experian and its subsidiaries for deceiving consumers about the use of the credit scores it sold to consumers. Experian claimed the credit scores were used by lenders to make credit decisions, but lenders didn’t use Experian’s scores to make those decisions.
The CFPB ordered Experian to truthfully represent how its credit scores are used and pay a civil penalty of $3 million.
Experian, based in Costa Mesa, Calif., is one of 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.
Credit scores are numerical summaries designed to predict consumer payment behavior, and many lenders and other commercial users consider these scores when deciding whether to extend credit – but no single credit score or credit scoring model is used by every lender.
However, in addition to the credit scores used by lenders, several companies have developed self-named “educational credit scores,” which lenders rarely, if ever, use. Experian’s educational credit score, called the “PLUS Score,” was offered directly to consumers.
According to CFPB, from at least 2012 through 2014, Experian violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by deceiving consumers about the use of the credit scores it sold. In advertising, Experian falsely represented that the credit scores it provided to consumers were the same scores lenders use to make credit decisions when, in fact, lenders did not use the scores Experian sold to consumers.
In some instances, there were significant differences between the PLUS Scores that Experian provided to consumers and the various credit scores lenders actually used. As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness.
Experian also violated the Fair Credit Reporting Act, which requires a credit reporting company to provide a free credit report once every twelve months and to operate a central source – AnnualCreditReport.com – where consumers can obtain their report. Until March 2014, consumers getting their report through Experian had to view Experian advertisements before they got the report, which violates the Fair Credit Reporting Act.
The full text of the CFPB’s Consent Order against Experian is available online.
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