Credit bureau Experian will pay $3 million to settle allegations from the Consumer Financial Protection Bureau that it provided misleading credit scores to consumers. (courtneyk / Getty Images)
Credit bureau Experian will pay a $3-million fine to settle a federal regulator’s claims that the firm sold credit scores that were of little or no use to consumers.
The Consumer Financial Protection Bureau announced the fine and settlement Thursday. The CFPB’s allegations against Experian are similar to those made against the nation’s two other major credit bureaus, Transunion and Equifax, which reached a larger settlement in January.
In all three cases, the CFPB said the credit bureaus offered consumers until at least 2014 “educational credit scores,” which are different from the scores the credit bureaus provide to lenders.
Credit card issuers, mortgage lenders and others generally use the ubiquitous FICO score, calculated by San Jose firm Fair Isaac Corp. using data from the credit bureaus. The bureaus have to pay Fair Isaac to run the scores.
The government agency said Experian, like the other bureaus, offered its own score to consumers and misleadingly implied those scores were “the same type of information lenders see when assessing your credit.”
The credit bureaus’ in-house scores often are fairly close to FICO scores but sometimes can be dramatically different, according to a 2012 CFPB report.
Thousands of consumers with FICO scores of 680 to 740 had educational scores that were much higher or lower, the report said, putting consumers into different credit categories — great, good, fair, etc. — about 20% of the time.
In its order, the CFPB acknowledged that Experian disclosed that its educational scores were not the scores used by lenders, but the bureau argued that the disclosures were not prominent enough.
Experian did not admit or deny wrongdoing in the settlement, and spokesman Gerry Tschopp said the company does not believe it violated the law.
He said the deal with the CFPB “addresses past products and marketing disclosures and does not reflect current marketing practices.” He also said the company’s current marketing is already in line with the organization’s order.
Experian’s settlement is smaller than that reached with the other two credit bureaus, which also were accused of offering free or discounted credit scores and reports through teaser offers for credit-monitoring services.
The CFPB said Transunion and Equifax lured consumers to sign up for free trials that later would automatically convert into paid credit-report subscriptions that cost more than $16 a month.
The two companies paid a total of $5.5 million in fines and $17.6 million in restitution to consumers to settle with the CFPB.
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