CFPB fines Experian $3 million over misleading credit scores

The Consumer Financial Protection Bureau fined Experian $3 million on Thursday for deceiving consumers about the nature and use of the credit scores it presented to consumers.

The credit agency did not admit to violating any laws, but accepted the consent order “in the interest of moving our business forward.”

Experian told consumers that the credit scores it provided to them were the same credit scores that lenders used to make credit decisions, the CFPB said Thursday. Lenders, the bureau claimed, actually use a score different from what consumers see.

“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” CFPB Director Richard Cordray said in a statement. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”

Experian statement

In an emailed statement to Automotive News, an Experian spokesman said, “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 consent order addresses past products and marketing disclosures and does not reflect current marketing practices. Experian will execute all actions directed by the CFPB; except for limited changes, our current marketing practices are already compliant with the order.”

‘Educational’

Several companies have developed “educational credit scores” to inform consumers, but lenders rarely rely on such scores, the CFPB said.

Experian came up with a proprietary scoring model that it calls PLUS Score. Experian showed consumers the PLUS score, but it is an educational score that is not used by lenders, the CFPB said. In some cases, the PLUS Scores and the scores lenders use had significant discrepancies.

“As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness,” the CFPB statement said.

Violations, enforcement

Experian, by deceiving customers about the use of the credit scores it sold to them, violated the Dodd-Frank Wall Street Reform and Consumer Protection Act from at least 2012 to 2014, the CFPB said.

The credit bureau also breached the Fair Credit Reporting Act, which requires a credit reporting company to give customers a free credit report annually and to allow customers to access their report on a central source, AnnualCreditReport.com. Experian also violated the Fair Credit Reporting Act until 2014 by making customers view its advertisements before accessing their credit report, the CFPB said.

Under the consent order, Experian must pay $3 million to the CFPB’s civil penalty fund, honestly inform consumers about the nature of the scores it sells to them and develop and implement a compliance management system.

Similar actions

The agency has taken similar actions against Experian’s competitors previously.

In January, the CFPB fined Equifax and TransUnion for deceiving consumers about the value and use of the credit scores they sold and for deceiving customers into enrolling in subscription programs.

Together, Equifax and TransUnion were ordered to pay more than $17.6 million to harmed customers and $5.5 million to the civil penalty fund.