New York bankruptcy lawyers usually tell their clients to obtain a credit report before filing bankruptcy. Most debtors should be able to do this for free because the Fair Credit Reporting Act (FCRA) requires the three big credit reporting bureaus, Experian, TransUnion, and Equifax, to provide consumers one free credit report per calendar year, which can best be done through AnnualCreditReport.com. However, debtors should be careful to ensure that the report is in fact free because the Consumer Financial Protection Bureau (CFPB) recently penalized two of the bureaus, TransUnion and Equifax, for deceiving consumers about their products.
The revelation is somewhat discouraging because TransUnion and Equifax engaged in some of the exact kinds of practices that consumer advocates have criticized other credit reporting companies of doing. In particular, they told consumers that their credit score products were free, but they enrolled people into subscription programs that began charging them on a monthly basis after a free trial period. This is the exact business practice that FreeCreditReport.com employed to trick customers into paying for a product that was explicitly advertised as free in its very name. The CFPB alleged that the subscription option was not clearly and conspicuously presented to consumers.
Primarily, though, the CFPB directed its enforcement action against the two bureaus for deceiving consumers about the value of the credit products they were marketing. The issue is somewhat subtle: The free credit scores consumers want are actually only part of what most lenders use when determining debtors’ creditworthiness for a particular loan. It might not be the case for more casual users, like employers or landlords, but mortgage lenders, for instance, use their own creditworthiness models into which the credit score only plays a partial role. TransUnion and Equifax instead told consumers that lenders used their credit reports in their entirety in lending decisions.
The CFPB also discovered that Equifax forced its Web site users to view advertisements for its products before redirecting them to AnnualCreditReport.com, violating the FCRA.
As a penalty for these abuses, the CFPB ordered TransUnion and Equifax to pay back consumers $13.9 million and $3.8 million, respectively, and it required them to pay a total $5.5 million into the CFPB’s penalty fund. On top of that, the agency required the two bureaus to truthfully represent their products, obtain consumers’ informed consent before enrolling them in subscription programs, and allow them to cancel easily.
Information on the CFPB’s enforcement action can be found here, and the agency also discusses the differences among credit scores here.
Debtors should be careful when obtaining their free credit scores because the three bureaus don’t always behave responsibly. If you’re considering bankruptcy, discussing your financial situation with an experienced New York bankruptcy lawyer will help you stay away from wasting money on unneeded financial products.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
