Major Credit Bureau Experian Fined $3 Million for Deceptively Marketing Credit Scores
The company deceived consumers about the use of the credit scores it sold them
The Consumer Financial Protection Bureau (CFPB) has fined major credit bureau Experian and its subsidiaries for deceptive marketing.
The company allegedly deceived consumers about the use of the credit scores that it sold them. It claimed that lenders used the scores to make credit decisions, which is not true.
The CFPB ordered Experian to pay a civil penalty of $3 million and to be truthful in representing to consumers how its credit scores are used.
"Experian deceived consumers over how the credit scores it marketed and sold were used by lenders," said CFPB Director Richard Cordray. "Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives."
Experian is one of the three largest credit reporting agencies in the U.S. It markets, advertises, sells, offers, and provides credit scores, credit reports, credit monitoring, and additional related products.
Although lenders and other commercial entities take credit scores into account when deciding whether or not to extend credit to a consumer, no one particular score or scoring model is used by each and every lender. In addition, many companies—including Experian—have developed so-called "educational credit scores" meant to inform consumers. Lenders rarely, if ever, use these scores in their credit decisions.
Experian broke the law by claiming that the credit scores it marketed and provided to consumers were the same scores that lenders use, when in reality those scores are "educational" scores not used by lenders.
The company also violated the law until March 2014 by forcing consumers obtaining the credit reports through Experian to view company advertisements before getting to the report. This tactic is prohibited by the Fair Credit Reporting Act.
In addition to paying a civil penalty and being truthful regarding the usefulness of its credit scores, Experian must also develop and put into effect a plan ensuring that its advertising practices related to credit scores and on certain websites comply with federal law and the terms of the CFPB's order.