CFPB and FTC Crack Down on TransUnion for Violating the Fair Credit Reporting Act

On October 12, 2023, TransUnion, one of North America's largest consumer reporting agencies, faced legal and regulatory enforcement action from the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) based on allegations that TransUnion’s rental screening subsidiary violated the Fair Credit Reporting Act. 

This news underscores how gaps in legacy technology impact industry stakeholders and consumers. In this article, we've distilled the key details to help you understand the unfolding scenario, why it matters, and the potential implications for consumers and industry stakeholders moving forward.

Why is this news important?

For both industry stakeholders and consumers, this lawsuit and related enforcement action surfaces the dire need to stay informed about the rights, laws, and options surrounding rental background checks and consumer reporting. More importantly, it highlights how alternative tenant screening solutions, especially those that are consumer-permissioned like Argyle, have become more relevant than ever to protect all parties involved in the process.

Who’s involved?

The parties involved include:

• The CFPB and FTC, who are responsible for investigating and taking legal action against TransUnion.

• TransUnion, who the agencies allege violated the Fair Credit Reporting Act by failing to ensure the accuracy of rental background checks and withholding third-party information from renters.

• Renters and landlords, who relied on the verifications provided by TransUnion’s rental screening subsidiary.

• Consumers who were misled by TransUnion confirming their security freeze requests were completed, when in reality, they were added to a years-long backlog.

What’s the situation?

Here’s the problem that started it all: TransUnion failed to ensure accurate eviction records in rental background checks. The company’s failures notably included not updating dismissed evictions and preventing the inclusion of sealed records. These inaccuracies posed significant disadvantages to renters, potentially affecting their ability to find a home. TransUnion also misled consumers by not disclosing the third-party vendors providing criminal and eviction records, instead implying these records were sourced directly from the jurisdictions where proceedings occurred.

As a result, the CFPB and FTC initiated legal action against TransUnion for alleging violations of the Fair Credit Reporting Act for  failing to take steps to produce accurate reports and failing to identify who provided inaccurate information. 

In addition, in a related enforcement action, the CFPB has sanctioned TransUnion as a result of TransUnion’s failure “to timely place or remove security freezes and locks” and failure to protect certain populations, including active-duty military, from prescreened solicitation lists. Significantly, the CFPB also concluded that TransUnion engaged in deceptive acts and practices by falsely telling certain consumers that their requests had been successful when they had not. 

What are the financial repercussions?

If approved by the court, the penalties imposed on TransUnion will be twofold. For the inaccurate rental background check reports, the CFPB and FTC will require TransUnion to:

• Refund $11 million to consumers.

• End illegal tenant screening practices: This means ensuring eviction records are as accurate as possible and being transparent with consumers asking for more information. Specifically, TransUnion will need to fix how it reports multiple filings for a single eviction case and ensure it doesn’t report on eviction cases that haven't reached a final decision.

• Pay a fine of $4 million, which will go into the CFPB's victims relief fund.

In the enforcement action, the CFPB ordered TransUnion to clean up its business practices, pay $3 million to consumers, and imposed an additional $5 million dollar penalty.

The takeaway

Recent heightened regulatory scrutiny on consumer reporting agencies underscores the need for accurate data and consumer protection. In that light, both consumers and industry stakeholders should be vigilant and well-informed about their rights and laws governing rental background checks and consumer reporting.

This news serves as a wake-up call to not over-rely on credit bureau-owned verification databases, which can be static and error-prone. It also highlights a pressing need to explore alternative income and employment verification solutions like Argyle that:

• Leverage direct-source income and employment data

• Explicitly inform consumers of parties involved in the transaction and surfaces our Consumer Terms and Privacy Notice for easy reference and full transparency

 Consumer-permissioned solutions like Argyle ensure consumers and industry stakeholders are better protected, facilitating informed decisions and easier access to housing.