In simultaneous enforcement actions against TransUnion and Equifax, the Consumer Financial Protection Bureau settled charges against the credit reporting agencies for, among other things, allegedly deceptive marketing practices involving proprietary “educational credit scores” that the agencies had advertised were used by lenders in making credit decisions. The actions strongly suggest a need for prescriptive disclosures for the marketing of educational credit scores. While the CFPB has in the past encouraged credit card issuers to provide the scores they actually use to consumers, those scores are distinct from educational credit scores often provided by non-lenders, such as third-party data aggregators. The CFPB’s actions against TransUnion and Equifax reinforce the agency’s continued focus on taking actions designed to help consumers understand the true value and utility of financial products and services, such as educational credit scores.
The agencies had been offering “educational credit scores” that were based upon proprietary models, namely the “Equifax Credit Score” marketed by Equifax and the “VantageScore” marketed by TransUnion. According to the orders, the agencies marketed these scores in a manner that allegedly suggested they were the same as the scores typically used by lenders for underwriting purposes. The CFPB, however, found that these marketing claims were deceptive because the agencies failed to properly disclose that the scores were “educational credit scores” rather than the often unique versions of the scores typically used by lenders. In addition, the Equifax consent order states that credit score models developed by the Fair Isaac Corporation (FICO) are “most often” used by lenders. While the orders don’t provide details of the evidence uncovered by the CFPB, we are aware of a number of lenders that at least consider proprietary credit scores other than FICO, including the VantageScore, as a component of their “custom” credit scoring models. Given this apparent inconsistency, we think it’s likely the CFPB’s issue was specific to the way these two agencies marketed their scores and the alleged lack of disclosure regarding the “educational” nature of those scores, rather than a broader concern regarding whether a credit score other than a FICO score can ever be marketed as being generally relied upon by creditors.
The remedial aspects of the consent orders require the agencies to follow certain disclosure requirements, some quite prescriptive, for future sales of their respective educational credit scores. For example, both orders require the agencies to disclose or “substantially state” that their educational scores are not the same as those used by other lenders, and that lenders may use a variety of other scores. The orders also require the agencies to specifically use the label “What You Need to Know” in a font size that is double the size of the disclosures to which it applies. While these disclosure requirements apply only to the agencies, companies offering similar credit-score products could consider adhering to these standards, at least to track a framework that the CFPB now finds to useful to consumers.
While the Bureau has often targeted companies for the inadequacy of their disclosures, the remediation requirements imposed on TransUnion and Equifax, including those mentioned above, reveal the Bureau’s perspective on the marketing of educational credit scores. Moreover, the orders add to the growing compilation of UDAAP enforcement actions that inform the standards under the Consumer Financial Protection Act of 2010 bearing on the marketing of consumer financial products and services.