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The Consumer Financial Protection Bureau (CFPB) has three ongoing probes into credit reference agency TransUnion, as the company expresses concern about increased scrutiny from regulators.
TransUnion’s latest investor relations report has shed light on how much trouble the company is in with the US consumer watchdog.
The report reveals that the company has set aside an “accrued liability" of $56m to deal with CFPB charges that were announced last year.
In April 2022, the CFPB charged TransUnion and its senior executive, John Danaher, with violating a law enforcement order from 2017.
The order was issued to stop the company from engaging in deceptive marketing, regarding its credit scores and other credit-related products.
After the order went into effect, the CFPB accused TransUnion of continuing its unlawful behaviour, disregarding the order’s requirements and continuing to employ deceitful digital dark patterns to profit from customers.
The regulator’s complaint also alleges that TransUnion violated additional consumer financial protection laws.
“There is a reasonable possibility that a loss in excess of the amount accrued may be incurred, and such an outcome could have a material adverse effect on our results of operations and financial condition,” the report suggests.
The report also unveils additional cases involving the CFPB that had previously not been made public.
For example, the company revealed that in March 2022 they received a Notice and Opportunity to Respond and Advise (NORA) letter from the CFPB.
This informed TransUnion that the CFPB’s Enforcement Division is considering whether to take legal action against the company in relation to its tenant and employment screening business, TransUnion Rental Screening Solutions.
The NORA letter alleges that the company violated the Fair Credit Reporting Act (FCRA), a federal law in the US that aims to ensure the accuracy, fairness and privacy of the information in consumer credit bureau files.
The letter suggests that the company failed to comply with the FCRA by not following “reasonable” procedures to assure maximum possible accuracy of information in consumer reports and disclose to consumers the sources of such information.
On July 27, the CFPB’s Enforcement Division advised the company that it had obtained authority to pursue an enforcement action jointly with the FTC.
“We are currently engaged in active settlement discussions with the CFPB and the FTC regarding this matter,” the report confirms.
TransUnion has warned that if its ongoing discussions with the regulators does not result in a negotiated resolution, it expects the CFPB and the FTC will pursue litigation against TransUnion LLC and its rental subsidiary, seeking redress, civil monetary penalties and injunctive relief.
“We cannot provide assurance that the CFPB and the FTC will not ultimately commence a legal action against us in this matter, nor are we able to predict the likely outcome of any such action,” the report says, adding that as of December, the company has an accrued liability for “an immaterial amount in connection with this matter.”
In August 2022 TransUnion received another NORA letter from the CFPB’s Enforcement Division, informing it that the regulator is considering legal action following an investigation relating to the placement and lifting of security freezes resulting from certain system issues.
“Should the CFPB commence an action against us, it may seek restitution, disgorgement, civil monetary penalties, injunctive relief or other corrective action,” the report says.
Heightened Scrutiny
In early January, CFPB chair Rohit Chopra confirmed that the regulator is considering whether new rules are necessary for the consumer reporting industry.
“Based in part on public comments by CFPB officials, we believe that this trend is likely to continue and could result in more regulatory and legislative scrutiny of the practices of our industry and additional regulatory enforcement actions and litigation, which could adversely affect our business and results of operations,” TransUnion says in their report.
Compliance costs and legal and regulatory exposure could increase materially if it continues to be targeted by the CFPB for additional enforcement actions, or if the CFPB or other regulators enact new regulations or change previously adopted regulations.
