After a lengthy investigation, the Consumer Financial Protection Bureau reports that two of the three major credit reporting agencies have deceived consumers.

Both Equifax and Transunion were dinged for deceit and also for taking advantage of consumers. The agencies were fined over $23 million.

The Atlantic reports:

In their investigation, the Bureau found that the two agencies had been misrepresenting the scores provided to consumers, telling them that the score reports they received were the same reports that lenders and businesses received, when, in fact, they were not. The investigation also found problems with the way the agencies advertised their products, using promotions that suggested that their credit reports were either free or cost only $1. According to the CFPB the agencies did not properly disclose that after a trial of seven to 30 days, individuals would be enrolled in a full-price subscription, which could total $16 or more per month. The Bureau also found Equifax to be in violation of the Fair Credit Reporting Act, which states that the agencies must provide one free report every 12 months made available at a central site. Before viewing their free report, consumers were forced to view advertisements for Equifax, which is prohibited by law.

These agencies—along with a third, Experian—make up the nation’s credit-reporting industry, and, as such, they wield a significant and unique influence over America’s’ financial health. Many lenders use only the data from these providers to determine whether someone can get a loan and how much interests he will pay. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them,” said CFPB Director Richard Cordray in a statement. Credit-reporting agencies keep track of an individual’s overall debt picture, how much credit they have access to, and how frequently payments are late, among other things. They then assign a score ranging from 300 to 850, which is consulted before one rents an apartment, gets a loan, opens a credit card, buys a car, or even gets a cellphone.*

Much of an individual’s ability to improve his or her finances is predicated on his or her ability to maintain a high credit score. To do that, he or she needs to be able to see accurate credit reports that reflect the information that lenders see when they assess them. The actions of Equifax and Transunion prevented that. And that’s especially troubling because the American credit system is a reinforcing cycle. Good credit often comes from having enough money to pay bills off in a timely manner, which raises one’s score and provides access to more credit at better interest rates. That can amount to tens of thousands of dollars in savings on mortgages, business loans, and credit- card interest. And having good credit means that a person’s score can sustain the decline that comes with lender inquiries for new credit cards or loans, which then gives them access to more credit—and raises their score once again. For Americans with bad credit and little income, the system works in exactly the opposite manner, and leaves people relegated to pricey and predatory options for basic financial needs.

Imagine how much money inaccurate scores have costs consumers. As The Atlantic pointed out, credit scores affect lender interest rates. Something as seemingly small as a two-percentage-point increase or decrease could amount to thousands of dollars.

The New York Times elaborated:

TransUnion will reimburse $13.93 million to consumers and pay a $3 million civil fine, while Equifax will reimburse $3.8 million and pay a $2.5 million civil fine, the bureau said.

Both companies will also modify their marketing practices. Among the changes, they will obtain customers’ consent to enroll them in services in which fees begin after free trials and make it easier for them to cancel services they do not want.

The bureau said the wrongful conduct had violated the Dodd-Frank financial-reform law and had occurred at TransUnion since July 2011 and at Equifax between July 2011 and March 2014.

Many lenders rely on credit scores from TransUnion, Equifax and their rival Experian when lending money.

But TransUnion and Equifax falsely represented the credit scores they sold to consumers as being the same scores that lenders used, the Consumer Financial Protection Bureau said.

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