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AJC Watchdog: First Alert

Keeping watch on those who hold the public trust and money

Credit scoring firm slapped with $3 million fine for deceit

Credit scoring giant Experian was fined $3 million by the Consumer Financial Protection Bureau Thursday for deceiving people about the use of credit scores it was selling to consumers.

“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,”said Richard Cordray, the Consumer Financial Protection Bureau director, in an announcement released Thursday. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”

The action by the consumer agency represented its second major action this year to slap down credit bureaus for failing to give the facts when selling products.  In January, the Consumer Financial Protection Bureau punished Atlanta-based Equifax and TransUnion for similar deceptions made about credit scores they were selling to consumers. Equifax and TransUnion also lured consumers into ongoing payments for credit-related products "with false promises," the agency found.

Equifax and TransUnion were ordered to pay a total of $5.5 million in fines and $17.6 million in restitution in that January action.

Experian disagree with the consumer agency's conclusions Thursday.

“While we do not believe our practices violated the law and did not admit to any of the allegations, in the interest of moving our business forward and staying focused on delivering an exceptional product and service experience to our clients and consumers, Experian has accepted the consent order," the company said in a statement.

Experian said the order from the consumer agency dealt with products sold in the past, and does not reflect its current marketing practices.

The consumer agency said Experian developed its own credit scoring model, called "PLUS Score." While the score was calculated using information in its credit files, it was considered an "educational" score and was not the score actually used to decide whether or not someone got a loan or credit account.

"In its advertising, Experian falsely represented that the credit scores it marketed and provided to consumers were the same scores lenders use to make credit decisions. In fact, lenders did not use the scores Experian sold to consumers. In some instances, there were significant differences between the PLUS Scores that Experian provided to consumers and the various credit scores lenders actually use. As a result, Experian’s credit scores in these instances presented an inaccurate picture of how lenders assessed consumer creditworthiness," the Consumer Financial Protection Bureau said in its announcement on Thursday.

Consumer organizations praised the agency's actions.

"The CFPB is on a roll," said National Consumer Law Center staff attorney Chi Chi Wu. “American consumers are so much the better off for the Consumer Financial Protection Bureau’s efforts to clean up the credit reporting industry.”

Wu said about 90 percent of the time, lenders use FICO scores when making lending decisions, and said consumers can often get their FICO score for free through the FICO Open Access program offered by many credit card companies and lenders.

“While there is no one credit score, a FICO score from the Open Access program is actually a score that is probably being used by lenders,” stated Wu.

Wu said that the three big credit bureaus,  Experian, Equifax, and TransUnion, are often the top three most complained about companies in the Consumer Financial Protection Bureau's monthly reports.

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About the Author

Carrie Teegardin is on the investigative team. She is a graduate of Duke University and has won numerous national journalism awards.