Experian Fined by CFPB Months After TransUnion

Experian Fined by CFPB Months After TransUnion

Experian Fined by CFPB Months After TransUnion and False advertising is defined as misleading consumers or potential consumers with incorrect or unproven information. You might say that Experian, one of the major credit scoring agencies, was found guilty of this recently. Specifically, Experian was fined $3 million by the Consumer Financial Protection Bureau (CFPB) for incorrectly telling consumers that the credit scores it offered were used by lenders to make decisions.

In addition to the fine, the CFPB informed Experian that it must be honest and accurate when relaying messages about the credit scores it offers moving forward.

Experian Isn’t the First

In a not-so-surprising reaction, Experian released a statement that respectfully disagreed with the CFPB’s ruling (though it should be noted that it complied with it). Regardless of Experian’s thoughts on the matter, the argument can be made that the credit scoring giant should have known better. After all, it’s not the first time that the CFPB has punished an entity this year.

Yes, back in January Equifax and TransUnion were dinged for similar acts of deceit. Specifically, this punishment came in the form of a combined $5.5 million fine and $17.6 payout in restitution.

So What Credit Scores Do Lenders Use?

With this news coming about Experian – not to mention similar penalties levied against TransUnion and Equifax just months ago – you might be wondering just what credit scores lenders do use when weighing whether a consumer’s financial behavior is worthy of approval. If it’s not a score from one of the major bureaus, then where does the score come from?

In a nutshell, there’s no real good universal answer to this question. For starters, every lender is different. Mortgage lenders may look at one score or series of scores, where an auto loan lender may look at a different one. You’ve likely heard of the FICO score as one of the most important scores that lenders use. It’s true that the FICO score is still king, but what many consumers may not realize about it is that there are many different types of FICO scores that use different formulas to provide lenders with that valuable three-digit number that’s so crucial to the approval decision-making process.

Experian Fined by CFPB Months After TransUnion That’s why Experian – as well as Equifax and TransUnion – were punished by the CFPB, because while it’s entirely possible that lenders do use their respective scores to weigh their decisions, it’s also entirely possible that they do not. It’s also not to say that there’s no value in checking your credit score or purchasing it from one of the major bureaus – just be sure that you think of it as a general estimate and not something that’s set in stone.

CFPB - Consumer Financial Protection Bureau

CFPB Protection – How the agency is protecting you.

How Does the CFPB Protect You Against Deceptive Collection Practices?Have you received a threatening call or letter from a debt collector for a debt that you’ve paid or that wasn’t yours in the first place? If so, you aren’t alone. Debt collections are covered by a patchwork of laws that have typically been poorly enforced. Illegal debt collection practices led to over 199,000 complaints to the FTC in 2012 and over $56 million in penalties since 2010. But, even this is a drop in the bucket compared to the levels of abuse that exist. For this reason, the Consumer Financial Protection Bureau was formed.

What is the Consumer Financial Protection Bureau?

In the 2000s, expanding access to credit and elimination of many consumer protections left millions of Americans with complicated debts that they did not understand. The CFPB was created by Congress in 2010 as a response to the rampant abuses in the credit and debt collection industries. Its establishment was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The organization’s first director, Rich Cordray, was appointed in 2012. The organization provides three essential services: educating consumers; enforcing consumer finance laws; and studying consumer behavior, financial markets and financial service providers.

Educating Consumers

Between loosened credit protections and the 2007 downturn, more and more people are turning to credit to make ends meet. But, many people do not understand the drawbacks of certain types of credit or their rights under the law. The CFPB has a section of their site that contains scores of credit tips that can help consumers learn more about the pros and cons of different kinds of credit and what rights they have when dealing with a debt. Consumers can learn more about credit repair, effective debt management and what makes up their credit scores.

Enforcing Laws

The CFPB oversees the activities of the 175 largest financial companies and exact penalties when those companies break the law. The CFPB website has sections for both individual consumers and whistleblowers who have seen illegal behavior to submit complaints. The organization also enforces laws against discrimination and other unfair consumer finance practices.

If a debt that you have paid or that did not belong to you in the first place is threatening your credit score, a complaint with the CFPB can help you get a resolution. They will forward your complaint to the offending company and work to get a response. They handle debts that include vehicle loans, payday loans, credit cards, mortgages and others. These complaints can be a good first step in eliminating harassing calls and beginning to repair credit.

Studying Finances

Consumers and the economy suffered a shocking blow during the 2007 financial crisis. Home values dropped, people lost their savings, jobs were eliminated and credit become impossible to find. To avoid future crises, the CFPB studies the economy to learn more about consumer behavior and monitor the financial markets to identify new risks to consumers and the economy. Through this and its roles educating consumers and protecting against unfair or dangerous practices, the CFPB can help individuals and help support a stronger economy.

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