The Consumer Financial Protection Bureau (CFPB) announced Thursday (March 23) that it took action against credit scoring company Experian and its subsidiaries for allegedly deceiving consumers about the use of credit scores it sold to consumers.
In a press release, the CFPB said Experian claimed the credit scores it marketed and provided to consumers were used by lenders to make credit decisions, but the lenders did not use Experian’s scores to make those decisions. The CFPB is calling on Experian to represent how its credit scores are used in a truthful manner and pay a civil penalty of $3 million.
“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” said CFPB Director Richard Cordray in the press release. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”
According to the CFPB, Experian developed its own proprietary credit scoring model, referred to as the PLUS Score, which it applied to information in consumer credit files to generate a credit score it offered directly to consumers. But the CFPB contends the PLUS Score is an “educational” credit score and isn’t used by lenders for credit decisions.
From at least 2012 through 2014, the CFPB said Experian violated the Dodd-Frank Wall Street Reform and Consumer Protection Act by tricking consumers about the use of the credit scores it sold. The CFPB contends that in its ads Experian said the credit scores given to consumers were the same scores lenders use to make credit decisions even though the lenders didn’t use the scores for underwriting purposes. Because of that, the CFPB said, “Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness.”
In addition to paying the fine and being honest with customers, the CFPB wants Experian to put in place a compliance management system to ensure its advertising practices as it related to credit scores meets federal consumer laws and the terms of the CFPB order.