The Consumer Financial Protection Bureau is suing credit reporting firm TransUnion and former CEO John Danacher, who headed the company’s consumer sales department, for violating a 2017 warrant to stop using fraudulent tactics to attract customers. to recurring subscription payments.
“TransUnion is an out-of-control recidivist who believes he is above the law,” said Rohit Chopra, the bureau’s director.
Following the 2017 order, TransUnion uses hard-to-spot small print on its website and registration forms to entice customers with recurring fees for its products, the bureau said. For example, TransUnion ran ads on yearcreditreport.com – the official site where users can get one free credit report a year from each of the three major bureaus – which, when clicked, diverted people to a paid credit monitoring registration form, according to the bureau.
Hundreds of people have complained that they tried to get their free annual report and instead signed up for a paid monthly subscription, the bureau said in a lawsuit filed Tuesday in federal court in Chicago, where TransUnion is based.
TransUnion said in a written statement that the bureau’s claims against both him and Mr Danacher were “unfounded and do not in any way reflect the approach we take in the first place to consumers, which we apply to the management of all our businesses”.
Mr Danacher, who led TransUnion Interactive, the subsidiary of the consumer sales company, for many years, took on an “advisory role” last April in preparation for his planned retirement in February, according to a company regulatory report filed last year. year.
Mr Danacher’s lawyers, Jeff Knox and Brooke Cousinella of Simpson Thacher & Bartlett, said in a written statement: “These allegations are unfounded and this claim shows that the CFPB focuses more on politically relevant titles than on facts or law. Mr Danacher is looking forward to his day in court.
Mr Chopra, who called for tougher penalties for companies that have repeatedly violated consumer protection laws, said the bureau had taken the rare step of bringing a personal charge against a company official, as Mr Danacher are “outrageous.”
Mr Danacher “knew that complying with the law would reduce corporate revenue” and “devised a plan to avoid it and circumvent it”, Mr Chopra said.
The bureau is asking the court for financial restitution of consumers by defendants, other property payments and an order banning the company from violating federal consumer protection laws.
TransUnion is one of the three major credit bureaus, along with Equifax and Experian. They make most of their money by selling credit reports to merchants and creditors, but they also sell credit monitoring products directly to consumers. TransUnion advertises on its website that it has “200 million files profiling almost every credit-active user in the United States.”
In the 2017 case, TransUnion paid nearly $ 14 million to consumers and $ 3 million in civil damages to settle claims that it lured consumers to recurring payments and made false statements about the credit scores it sold to consumers. Without acknowledging any past violations, TransUnion also agreed to five years of intensified monitoring by the bureau to confirm its compliance with federal consumer laws.
The consumer bureau said in its latest lawsuit that it has told TransUnion many times, starting in 2019 and continuing until 2021, that the company violated the order from 2017. But the company has not changed its behavior, said Mr. Chopra. press conference.
“TransUnion’s management is either unwilling or unable to run its business legally,” Mr Chopra said.
The Bureau stated in its complaint that Mr Danacher had taken a number of steps to circumvent the contract. This included stopping the implementation of an ‘opt-in’ checkbox designed to stop unintentional subscription subscriptions.
“I do not take lightly the decision to blame people, but based on the evidence found in the investigation, I think it is appropriate,” Mr Chopra said. He added that if the bureau’s investigation reveals other evidence of wrongdoing by senior officials, the bureau will change its complaint to bring them up in person.
TransUnion said in a statement that it had tried to abide by the terms of the agreement, but was met with silence when it sought guidance from the bureau.
“Despite TransUnion’s many years of good faith efforts to resolve this issue, the current CFPB management has refused to meet with us,” the company said. He added that “the unrealistic and unenforceable demands of the bureau have left us with no alternative but to defend ourselves fully.”
TransUnion revealed in regulatory documentation in February that it was in discussions with the consumer bureau regarding compliance with the 2017 consent order and expects the agency to sue if the company does not resolve the case. TransUnion has set aside $ 27 million and said it provides a “reasonable opportunity” for additional costs.
Mr Chopra, who worked on setting up the consumer bureau in 2010 and 2011 and rejoined the agency last year as its director, is known as an aggressive regulator and speaks openly of his frustration with some companies breaking the law again and again. He wants regulators to exceed fines and impose sanctions – such as revoking licenses or growth ceilings – which really hurts, he said.
“We need to forcibly address repetitive offenders to change the company’s behavior and ensure that companies realize that it is cheaper and better for them to ultimately comply with the law than to break it,” he said. Mr. Chopra in a speech last month.
Ed Mills, a political analyst at Raymond James, a financial services firm, said the lawsuit was a warning shot to the financial industry – and a reversal of the agency’s meekness during the Trump administration.
“It’s almost like a bad movie title: ‘CFPB is back’ – and this time, it’s personal,” Mr Mills said. “Chopra was very clear in this speech that he does not believe that paying fines or introducing consent decrees changes behavior. One of the only ways he could change his behavior was to prosecute individuals for personal responsibility. “