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The government fined the credit bureaus: What it means

By Mike Cetera ·
Wednesday, January 4, 2017
Posted: 4 pm ET
astarot/Getty Images

astarot/Getty Images

Two of the three major credit bureaus misled customers about the true value of the credit scores they offer, the Consumer Financial Protection Bureau said this week in announcing it had levied more than $23 million in fines and restitution against the companies and their subsidiaries.

The CPFB said in separate consent orders Equifax and TransUnion marketed their credit scores as if they would be used in lending decisions, although they typically aren't. The popular FICO score is the most widely used credit score by lenders.

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"For example, one Equifax advertisement stated: 'Your loan officers is reviewing your credit score. See your score,'" according to the order. "Another advertisement stated: 'Banks and lenders will most likely check your credit -- make sure you see what they see and learn what that means for FREE.'"

The companies offered disclaimers – Equifax, for example called its score "educational" -- but the CFPB argued the warnings were neither clear nor conspicuous.

The CFPB also said the companies "lured consumers into costly recurring payments for credit-related products with false promises." In advertising, the companies falsely claimed the scores and credit-related products were either free or extremely discounted.

What consumers really signed up for, however, was a free trial after which they would be automatically enrolled in a paid monthly subscription service for products like credit monitoring.

In separate statements, the two companies said they believed they did not violate any laws, according to The Washington Post. Equifax said it began to address the bureau's concerns about three years ago, while TransUnion noted it would "fully compensate any consumer who may not have understood that his or her trial program would convert to a subscription.

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Guarding your credit

I use a variety of free sources -- including myBankrate -- to check my credit score. I've touted the free FICO score offered by Discover. Mine is currently an 839.

But I don’t take that three-digit number as gospel because I know lenders utilize multiple credit scores in making lending decisions. The free number is not necessarily the number the lender is going to see, rather it's a marker by which I can judge myself.

Am I being as responsible with credit as I can be?

One thing these fines implicitly highlight, though, may be the value of add-on credit products. As Ed Mierzwinski, the consumer program director at the U.S. Public Interest Research Group, noted in a series of tweets, there are other alternatives.

A few months ago, I decided to protect myself from the risk of new account fraud by freezing my credit. I even wrote about it.

If the goal of exploring credit-protection products is to prevent someone from using your identity to open new accounts, consider a credit freeze instead.

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