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Experian imposes $3 million CFPB fine for credit rating campaign - FinTech Future
The CFPB took legal proceedings against Experian for alleging that it had made incorrect statements about the use of credit information it had been selling to the consumer following the publication of a report criticizing the credit reference sector for various issues in the past few weeks. Experian was the first consumer to be informed about the use of credit information. According to the CFPB, the firm alleged that its PLUS score, which was commercialized to consumer customers, was used by creditors to make credit choices, while creditors actually did not use Experian's PLUS score to make those choices.
Instead, PLUS Scores are actually an education credit designed to educate the consumer and are "rarely, if ever" used by creditors to assess a prospective debtor. CFPB alleges that Experian breached the Dodd-Frank Act from at least 2012 to 2014 by incorrectly claiming that the credit it sold to consumer creditworthiness is the same as that used by creditors to make credit choices.
The CFPB said that in some cases there were "significant differences" between consumers' PLUS ratings and the actual creditors used. Consequently, the results of Experian's sales to customers gave an incorrect impression of their credit standing. CFPB also found that Experian was in breach of the Fair Credit Reporting Act, which required credit bureaus to produce free credit reports every 12 month.
By March 2014, customers who received their Experian report had to look at Experian advertisements before they came to the report, which violated the law's ban on such advertisements. As part of a memorandum of understanding with the CFPB, Experian must make a $3 million penalty payment and modify its commercial practice to reflect precisely how it uses its creditworthiness, include the implementation of a federally compliant credit approval process and the conditions of the memorandum of understanding.
The Experian does not acknowledge or reject any of the costs in the opt-in order arrangement. CFPB published a report on March 2 describing the concerns it had discovered in the credit reference business, which included "widespread" concerns with false information being sent to credit reference firms. It also noted that credit bureaus did not follow federally accepted regulations by refraining from sending information to customers about the outcome of customer litigation.
The credit report took third place in the last monthly CFPB complaint report, with 4,620 cases in February, an improvement of 24 per cent over the year. As of July 2011, credit reports have been the third most frequently queried type of products, accounting for 17 per cent of CFPB's overall complaint to consumers.