The CFPB announced that it has entered into a consent order with Experian, a consumer reporting agency, for allegedly engaging in the deceptive marketing of credit scores in violation of the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts or practices.  The consent order also settles allegations that the company displayed advertisements to consumers before providing free annual credit reports in violation of the Fair Credit Reporting Act.  The consent order requires the company to pay a $3 million civil money penalty to the CFPB.

According to the consent order, Experian developed its own proprietary credit scoring model, which was offered directly to consumers as an “educational” credit score.  The CFPB alleges that the score was not used by lenders despite Experian’s claims that the score provides consumers with the same type of information lenders see.  Despite disclosures accompanying Experian’s marketing materials about the nature of its educational credit score, the CFPB concluded that the disclosures were neither conspicuous nor in close proximity to the deceptive claims.  The consent order dictates the form of future Experian disclosures relating to credit scores by requiring:

For all written communications, and for Internet offers, on each landing page or email where an educational credit score is advertised, ensure that, in the first instance in which the disclosure appears, the disclosure contains a label in a font size double that of the disclosure that says: “What You Need to Know.”

The CFPB is also requiring Experian to collect and review the following data metrics in order to improve its communications with consumers regarding all of its credit score products, not just the educational scores at issue:

• Key performance metrics, such as Consumer Complaints (both those it receives directly as well as those it receives through other channels, such as the CFPB and State Attorneys General Offices), for evidence of consumer confusion regarding credit scores it offers to consumers; and
• Empirical data regarding consumer perceptions of Experian’s advertising with regard to the nature of credit scores and the pricing structure of credit scores for evidence of consumer confusion regarding the credit scores it offers to consumers.

The consent order also alleged that Experian required consumers to view advertisements before consumers could receive a free credit report despite a prohibition against such advertising in the FCRA.  The CFPB alleged that the Experian website to which consumers are directed after requesting a file disclosure through AnnualCreditReport.com contained banner ads and product links, but not the full file disclosure.