Written by: Eric Bank
Edited by: Lillian Guevara-Castro
Reviewed by: Adam West
Key Takeaways
The recent announcement of a $23 million class action settlement writes a fresh chapter in the legal history of TransUnion, resolving allegations that the firm improperly dealt with consumer credit report complaints.
The agreement, which must still win approval in court, follows claims the company did not duly investigate consumer complaints filed through the FCRA.
This legal development, announced on May 5, comes on the heels of another case involving the Consumer Financial Protection Bureau (CFPB), which discreetly dropped its long-standing enforcement action against TransUnion on Feb. 28.
The CFPB had charged the firm and its previous executive John Danaher with deceptive practices related to credit monitoring subscriptions.
The class action case charged that TransUnion systematically disregarded the FCRA when it used defective automated systems to resolve disputes and left inaccuracies on consumer reports.
The proposed settlement involves paying affected individuals cash and requiring changes to the way TransUnion processes disputes.
In contrast, the CFPB’s case against TransUnion had to do with how the firm marketed and signed up customers into credit products. The agency alleged the firm deceived customers into yearly subscription plans and did not comply with a consent order in 2017.
Then CFPB Director Rohit Chopra, in a statement when the lawsuit was filed, had decried, “TransUnion is an out-of-control repeat offender that believes it is above the law.” The bureau’s abrupt dismissal of the case without penalties and additional requirements raised eyebrows in the industry.
The action does not impact the result of the $23 million credit settlement of the dispute, however, which concerns a different range of alleged infractions.
Nevertheless, cumulatively, the rulings are indicative of an atmosphere in which large credit reporting agencies are subject to increased legal scrutiny but may also achieve more lenient outcomes as priorities evolve on the enforcement side.
A spokesperson for TransUnion told a reporter the firm denies any wrongdoing in both cases and remains dedicated to fair consumer treatment and accurate credit reporting.
“While we disagree with the allegations, we believe resolving this matter is in the best interest of our customers and our business,” the spokesperson said of the credit dispute settlement.
Industry Implications
For subprime lenders and credit-reliant businesses alike, the TransUnion settlement is a reminder that processes surrounding resolution of consumer disputes are a hot topic — both from the regulatory and consumer confidence perspectives.
Timely and precise credit data on which lenders depend may necessitate an examination of how they resolve consumer disputes internally or through bureau interfaces.
At the same time, the CFPB’s retreat on the subscription case represents a subtle enforcement stance.
According to legal experts, it may indicate resource prioritization or management of litigation risk, but could also inspire other firms to test the bureau’s jurisdiction.
Whether this represents a general trend or a singular set of results is unclear.
In the near term, however, TransUnion’s prominent legal settlements demonstrate credit reporting agencies are balancing on a tightrope between compliance, consumer expectations, and legal risk.
