Experian Facing a Major Fine for Deceiving Consumers

The Consumer Financial Protection Bureau (CFPB) is penalizing Experian, one of the major consumer credit bureaus, for lying to consumers about credit scores.

If you’re one of the consumers who purchased the “PLUS score” from Experian, you were probably surprised to find out that you had invested in an educational score after being told that it was used by lenders for assessing risk level. The CFPB determined that between the years of 2012 and 2014 Experian,  “falsely represented the credit scores it marketed and provided to consumers were the same scores lenders use to make credit decisions.” The product under question was known as the “PLUS score” that was sold to consumers; Experian is facing a heavy fine of  $3 million.

This comes after a similar violation by TransUnion and Equifax, both faced a heavier penalty of $17.6 million in restitution and a $5.5 million fine for deceptive advertising of the cost and value of credit scores dating back to 2011 for TransUnion and between the years of 2011 and 2014 for Equifax.

According to the CFPB, all three bureaus were in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This act was passed in 2010 by the Obama administration in response to the financial crisis of 2008. Under Dodd-Frank several new government agencies (including the CFPB) were set up to protect consumers by overseeing the banking system and wall street’s abusive behavior that is said to have caused the housing market crash of 2008.

What Scores Do Lenders Use?

Roughly 90% of U.S. lenders use FICO® scores in order to make credit decisions. FICO® has over 50 scores available to consumers all of which are used depending what kind of credit you’re seeking.

For instance:

• If you’re looking to finance a new car FICO® Auto Scores will likely be used.
• Opening a new credit card account, FICO® Bankcard Scores or FICO® Score 8 will be used.
• Or if you’re looking to get a mortgage, FICO® Mortgage Scores will be used.

Consumers should ask their lender or creditor what score they are looking at and what score they are looking for in order to obtain tier one rates. If you’re planning to open a new credit account or get financing of any kind, you should make sure you’re reviewing your FICO®  scores and stay far away from educational scores that are likely inflated or inaccurate. This way you will know where your credit stands before allowing a creditor to pull your scores.

For more information or if you have questions regarding your credit or a client’s credit, feel free to reach out to one of our credit experts.