|Theena Ocay |||Jan 07, 2017 02:36 AM EST|
(Photo : Facebook) The Consumer Financial Protection Bureau fined Transunion and Equifax more than $23 Million for misleading consumers about the value of the services they provide.
Two of the largest credit bureaus in the US have agreed to settle more than $23 million of fines and reimbursements without admitting or denying the Consumer Financial Protection Bureau (CFPB)'s findings.
CFPB fined TransUnion and Equifax for misleading consumers about the value of the services they provide. The US financial watchdogs announced on Tuesday that it ordered the two major credit bureaus to pay over $17.6 million in restitution to consumers and $5.5 million fines to CFPB.
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Credit Bureaus Provided Services
Credit Bureaus, which are also called credit reporting agencies, are basically a clearinghouse for information of the credit rating of individuals or firms. These used to research and collect individual credit report or history and sell it for a fee to creditors so they can make a decision on granting loans.
Furthermore, they are also keeping these private data safe and secure, with an aim of making customers more credit-worthy. This is determined with one of their major services called credit scores.
A high credit scores mean lower interest as it implies that the creditor is a solid bet to repay a loan. Lower scores, on the other hand, mean higher risk for potential buyers, as creditors might need to take further steps to improve their credit.
Both companies sell credit monitoring services for as much as $16 per month to help consumers in improving their credit-worthiness.
But the CFPB said the scores sold to consumers by TransUnion and Equifax were not typically used by lenders to make credit decisions.
The scores that TransUnion sell to its consumers are reportedly based on a model from VantageScore Solutions, LLC., while the Equifax Credit Scores were based on Equifax's proprietary model, which is an "educational" credit score. Both of these models are typically not used by lenders to make credit decisions.
The two largest credit bureaus had violated the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act since July 2011 for Transunion and between July 2011 and March 2014 for Equifax, according to a statement on the CFBC website.
Settling without Confirming
However, Equifax noted that the CFPB's probe continued for nearly three years, and after the investigation started, it already made necessary changes to address the concerns. Furthermore, both companies believed that they have not violated any laws.
"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," the company's statement read.
TransUnion, on the other hand, said that it continues to believe that its advertising has been clear and has complied with laws and other government guidance. They are committed to making improvements to their consumer experience and working cooperatively with the CFPB.
However, Equifax agreed to pay $2.5 million in civil penalties and $3.8 million in consumer restitution, while TransUnion will pay $3 million for civil penalty and more than $13.9 million in consumer restitution.
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