On January 3, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a press release stating that they had taken action against Equifax and TransUnion, two leading credit rating agencies, for deceiving consumers about the usefulness and cost of credit scores they sold to consumers. The two companies were ordered to pay $17.6 million in restitution to consumers and fines totaling $5.5 million to the CFPB.
According to the press release, Equifax and TransUnion collect credit information from consumers and then generate credit reports and scores that are provided to businesses that might lend to, or do other business with, those consumers. No single credit score or report is used by every lender. Lenders typically use an array of credit scores based on different scoring models from different providers. The problem the CFPB had with Equifax and TransUnion was that the scores they marketed and provided to consumers — which sometimes the consumers paid extra fees to receive or monitor — were not the scores that lenders typically use in making lending decisions. (So essentially consumers were paying to have scores generated and monitored that were not going to be useful to them in the end.)
The CFPB also took issue with Equifax and TransUnion advertising. The companies would offer consumers a free trial for credit score monitoring or other products and then, once the free trial period expired, consumers would be automatically enrolled in a subscription program for a recurring monthly fee, unless the consumer cancelled during the trial period. The CFPB maintains the billing structure — which could stick people into monthly commitments — was not made clear to consumers.
Consumers can, and should, still obtain their free annual credit report from Equifax, TransUnion and Experian, by going to annualcreditreport.com BUT they should make sure they do not sign on to any additional credit monitoring or credit reporting services unless they want those services. If you are thinking of bankruptcy, most bankruptcy attorneys will tell you they only need the annual credit report and not a monthly monitoring service in order to prepare a petition for filing.