Page 54 - GIADA-April2017

CFPB Fines Experian $3 Million for

Deceiving Consumers in Marketing Credit Scores

Credit Reporting Company Misstated How Credit Scores It Sold Were Used

The Consumer Financial Protection Bu- actually used by lenders, several compa- central source – AnnualCreditReport.com
reau (CFPB) today took action against nies have developed so-called “educational – where consumers can obtain their report.
Experian and its subsidiaries for deceiving credit scores,” which lenders rarely, if ever, Until March 2014, consumers getting their
consumers about the use of credit scores it use. These scores are intended to inform report through Experian had to view Ex-
sold to consumers. Experian claimed the consumers. perian advertisements before they got to
credit scores it marketed and provided to the report. This violates the Fair Credit Re-
consumers were used by lenders to make Experian developed its own proprietary porting Act prohibition of such advertising
credit decisions. In fact, lenders did not use credit scoring model, referred to as the tactics.
Experian’s scores to make those decisions. “PLUS Score,” which it applied to informa-
The CFPB ordered Experian to truthfully tion in consumer credit files to generate a Enforcement Action
represent how its credit scores are used. Ex- credit score it offered directly to consum- Under the Dodd-Frank Wall Street Reform
perian must also pay a civil penalty of $3 ers. The PLUS Score is an “educational” and Consumer Protection Act, the CFPB
million. credit score and is not used by lenders for is authorized to take action against institu-
credit decisions. From at least 2012 through tions engaged in unfair, deceptive, or abu-
“Experian deceived consumers over how 2014, Experian violated the Dodd-Frank sive acts or practices, or that otherwise vio-
the credit scores it marketed and sold Wall Street Reform and Consumer Pro- late federal consumer financial laws. Under
were used by lenders,” said CFPB Director tection Act by deceiving consumers about the consent order, Experian must:
Richard Cordray. “Consumers deserve and the use of the credit scores it sold. In its ad- • Pay a $3 million penalty: Experian must
should expect honest and accurate infor- vertising, Experian falsely represented that pay a civil money penalty of $3 million
mation about their credit scores, which are the credit scores it marketed and provided to the Bureau’s Civil Penalty Fund.
central to their financial lives.” to consumers were the same scores lenders • Truthfully represent the usefulness of
use to make credit decisions. In fact, lend- credit scores it sells: Experian must in-
Experian, based in Costa Mesa, Calif., is ers did not use the scores Experian sold to form consumers about the nature of the
one of the nation’s three largest credit re- consumers. In some instances, there were scores it sells to consumers.
porting agencies. Experian markets, ad- significant differences between the PLUS • Put in place an effective compliance
vertises, sells, offers, and provides credit Scores that Experian provided to consum- management system: Experian must
scores, credit reports, credit monitoring, ers and the various credit scores lenders develop and implement a plan to make
and other related products to consumers actually use. As a result, Experian’s credit sure its advertising practices relating to
and third parties. Credit scores are numeri- scores in these instances presented an inac- credit scores and on Internet webpages
cal summaries designed to predict consum- curate picture of how lenders assessed con- that consumers access through Annual-
er payment behavior in using credit. Many sumer creditworthiness. CreditReport.com comply with federal
lenders and other commercial users con- consumer laws and the terms of the CF-
sider these scores when deciding whether Experian also violated the Fair Credit Re- PB’s consent order.
to extend credit. No single credit score or porting Act, which requires a credit report-
credit scoring model is used by every lend- ing company to provide a free credit report Click here to see the full text of the CFPB’s
er. In addition to the credit scores that are once every twelve months and to operate a Consent Order against Experian. n

52 | GIADA Independent Auto Dealer APRIL 2017