Fed agency: Equifax must pay fine, restitution for tricking customers

Atlanta-based Equifax agreed Tuesday to pay $6.3 million in fines and restitution after a federal agency accused it of misleading customers who bought its credit scores and other products. Photo courtesy of Equifax.

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Atlanta-based Equifax agreed Tuesday to pay $6.3 million in fines and restitution after a federal agency accused it of misleading customers who bought its credit scores and other products. Photo courtesy of Equifax.

A federal agency ordered Atlanta-based Equifax and another credit reporting bureau, TransUnion, to pay more than $23 million in combined fines and restitution for allegedly misleading customers on credit score services that they were selling.

The two companies, which are among the nation’s Big Three credit agencies, misled consumers on the cost and value of the credit scores they market to consumers, according to the Consumer Financial Protection Bureau.

"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."

Both companies didn’t admit or deny the CFPB’s allegations in consent orders with the agency.

“The CFPB’s investigation into these matters has been ongoing for nearly three years, and Equifax implemented changes addressing the CFPB’s concerns shortly after the investigation began,” the company said in a statement. “While Equifax does not believe it has violated any laws and has not admitted any liability, Equifax determined it was in its best interest to resolve the matter with the CFPB.”

It wasn’t immediately clear how many people were affected by the companies’ practices that were challenged by the CFPB.

But it could be a large number, given the number of incidents where hackers stole personal information on millions of consumers at large retailers in recent years, prompting people to check their credit reports.

Under federal law, consumers can obtain one free credit report annually from each credit reporting firm, or up to three a year from the three major credit reporting firms.

But the CFPB said that between 2011 and 2014, Equifax and TransUnion deceived customers into signing up for subscriptions, typically for $16 a month, for their credit scores and other information that often can be obtained for free.

The federal agency said the two companies also sold credit scores to consumers that typically aren’t the same as those used by banks and other lenders to make credit decisions. The CFPB said most lenders instead use so-called “FICO” credit scores offered by another company, Fair Isaac Corp.

The CFPB said the two firms’ actions violated the federal Fair Credit Reporting Act by making it difficult for customers to know how much they would be charged for the subscription services after a free trial period.

In its consent order, Equifax agreed to pay a $2.5 million civil fine and to provide $3.8 million in restitution to customers.

TransUnion, based in Chicago, agreed to pay a $3 million fine and to provide more than $13.9 million in restitution.

Under the consent orders, the companies will determine which customers were affected, and up to 90 days to come up with CFPB-approved plans to provide written notices and restitution payments to those people.

The companies also agreed to provide clearer information on the cost and usefulness of their services, and to get customers’ express consent before signing them up for monthly subscriptions.