Credit Bureau Creepers
A surveillance economy emerges in era of "Big Data"
A credit score is essential for anyone applying for a loan and is often used in decisions about renting an apartment and even for getting a job.
In short, what a credit bureau does with the information it has about you can have a big impact on your life and the way you interact financially.
The consumer protection attorneys at Finn Law Group report on how the arenas of big data and credit reporting intersect — creating a “surveillance economy” that can have a big (and negative) impact on consumers.
Here’s how they describe the threat:
To keep their data fresh, companies are constantly appending consumer records with “predictive” data that is generated by computer “black box” models. This often includes things like a consumer’s likelihood of getting divorced, their health status, and even how likely they are to engage in risky behavior. Predictive data is often used to target ads and marketing materials, but it can also be used to make credit decisions.
This is harmful to consumers in several ways. First, it disproportionately impacts low-income consumers and minorities who are more likely to be ‘credit invisible’ or ‘unscorable.’ This means they don’t have enough information in their credit file to generate a score, so they’re automatically treated as high-risk. Second, even if you do have a good credit score, you may still be denied credit if you don’t meet other criteria used to judge your ‘creditworthiness.’ For example, you may be judged as being too young or too old, having too much debt, or living in an ‘undesirable’ neighborhood. Third, data breaches are becoming more common, and our personal information is at risk of being leaked or sold without our consent.
It’s important to note that the CFPB is taking some action to address these concerns. Currently, there’s little incentive for credit reporting agencies to correct errors. After all, they work for the banks and credit card companies who pay for their information, not the consumers who suffer from the mistakes.
If you notice an error on your credit report, contest it with the credit bureaus — in writing and by certified mail.
If you don’t get results that way, file a complaint with the CFPB.
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Speaking of Deceiving
On the heels of an announcement by the Consumer Financial Protection Bureau (CFPB) that TransUnion is being charged with violating an enforcement order and continuing to engage in deceptive marketing practices, advocates at the National Consumer Law Center (NCLC) warned against using credit monitoring services.
“This type of flagrant violation is typical behavior for not just TransUnion, but all three credit bureaus,” said Chi Chi Wu, staff attorney at the National Consumer Law Center. “Federal regulators, state Attorneys General, consumer advocates, and private attorneys have been battling a culture of impunity and arrogance by the credit bureaus for decades. Unfortunately, it’s the American consumer who ultimately pays the price for the credit bureaus’ longstanding habit of flouting the law.”
The CFPB noted:
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, TransUnion continued its unlawful behavior, disregarded the order’s requirements, and continued employing deceitful digital dark patterns to profit from customers. The Bureau’s complaint also alleges that TransUnion violated additional consumer financial protection laws.
“TransUnion is an out-of-control repeat offender that believes it is above the law,” said CFPB Director Rohit Chopra. “I am concerned that TransUnion’s leadership is either unwilling or incapable of operating its businesses lawfully.”
While NCLC views today’s move as a step in the right direction, the advocacy group called on the CFPB to do even more to protect consumers from out-of-control credit bureaus.
“We commend the CFPB for taking strong and decisive action in the face of TransUnion’s outright noncompliance with a law enforcement order that the company itself agreed to,” stated Ariel Nelson, staff attorney at the National Consumer Law Center. “We hope and expect to see more from the CFPB to rein in the credit bureaus’ bad behavior. No company should be allowed to use deceptive practices such as digital dark patterns–tricks and trapdoors built into a website to lead consumers to unknowingly click on an agreement to make a purchase or authorize recurring payments–and plain old misrepresentation to sell products.”
Nelson also warned that consumers should avoid the credit bureaus’ credit monitoring products at all costs. “These products are a waste of your money. And when credit monitoring agreements include forced arbitration clauses, they can also force you to sign away your rights to take legal action if there is an error in your credit report.”
“Always use annualcreditreport.com to order your credit report, and you may want to order by phone or mail to avoid accidentally getting charged for credit monitoring. Check your credit card statements and call to unenroll from credit monitoring if you see a charge for it,” Nelson added.
And Even More Deception
Harris Jewelry will pay refunds and stop loan collections to settle predatory-lending charges (New York Times, 2022)
Harris Jewelry, a now-defunct jewelry retailer that government officials said had preyed on military families by selling them overpriced baubles using high-interest loans, will pay millions in refunds and stop collecting on its loans in a settlement deal announced on Wednesday by the Federal Trade Commission and 18 state attorneys general.
Predatory lending to members of the military is an area of growing concern for regulators and watchdogs; soldiers’ steady paychecks — and the financial naïveté of many young recruits — are a potent lure for hucksters. New York State Attorney General Letitia James’s office cited Harris Jewelry’s “Mother’s Medal of Honor” necklace as an example of its tactics: The company bought the item from its wholesaler for less than $78 and sold it for $799. Taxes, fees, and the protection plan took the total price that many buyers paid to nearly $975.