If the court ruling is allowed to stand, CFPB Director Richard Cordray can be fired at will by the president.
If the court ruling is allowed to stand, CFPB Director Richard Cordray can be fired at will by the president. Image: Bloomberg News

The Consumer Financial Protection Bureau on Tuesday levied more than $23 million in fines and restitution against two of the nation's largest consumer credit agencies, saying that the companies deceived consumers into paying for data that had little beneficial value.

In a pair of consent orders, the bureau said that both Chicago-based TransUnion and Atlanta-based Equifax had marketed and sold credit reporting and monitoring services to consumers that misleadingly implied that the data was of a higher value than it actually was. The agencies also enrolled consumers in services that suggested low costs, but which were recurring payment programs that were not sufficiently disclosed.

TransUnion and Equifax are two of the three largest credit reporting firms, along with Experian, which is based in Dublin, Ireland. The firms collect credit information on all financial transactions and distill that information — including loan payments, collections and delinquencies — into a consumer credit score that lenders rely on to determine what terms to offer the individual borrower.

Subsidiaries of the firms also provide data to consumers that help them understand what their credit score is and how it is determined, but the bureaus are required to provide consumers with one annual credit report per year free of charge under the Fair Credit Reporting Act.

CFPB Director Richard Cordray said that consumers' credit scores are a core touchstone of people's financial affairs, and criticized the reporting agencies for employing deceptive practices to entice consumers to purchase information or enroll in services that they did not need.

"TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises," said CFPB Director Richard Cordray. "Credit scores are central to a consumer's financial life and people deserve honest and accurate information about them."

In the agency's complaint against Equifax, it states that since at least 2011, the firm advertised its consumer credit reporting services as "free", when in fact they only offered a free trial, at the conclusion of which the consumer would be automatically enrolled in a program with recurring monthly fees. The complaint also said that Equifax developed and marketed a proprietary credit score — known as the "Equifax Credit Score" — as being relied upon by lenders, when in fact most lenders examine only a consumer's Fair Isaac Corporation credit score — known as a FICO score.

The bureau's complaint against TransUnion is substantially similar, arguing that the firm advertised services as "free" or costing "$1" when they in fact enrolled the consumer in a recurring monthly program. The firm also marketed its proprietary TransUnion VantageScore as being a more accurate determinant of a borrower's creditworthiness, and while TransUnion did market its proprietary credit score to lenders, "the vast majority of credit decisions made by lenders…are not based on VantageScore credit scores," the decree said.

The CFPB also said that Equifax had violated the FCRA by requiring consumers wishing to access their free credit report to navigate past Equifax advertisements for its deceptive services.

The bureau ordered TransUnion to set aside $13.9 million for customer restitution and a $3 million fine. Equifax, meanwhile, is required to set aside nearly $3.8 million for restitution and pay a $2.5 million fine.