I was going to draw your attention to the irony of it, but the financial services industry is no stranger to contradictions, is it?
Equifax and TransUnion, the two best-known personal credit reporting agencies, have been ordered in the United States to pay more than $23 million USD in penalties and refunds to customers. They are criticized for having advertised a credit reporting service for $1 per month (or free) when in reality it cost members more than $200 per year.
Basically, the Consumer Financial Protection Bureau (CFPB), an American government agency that is comparable to our Office de la protection du consommateur (Office of Consumer Protection), says above all that the credit score for which the consumer pays is not very useful. According to the CFPB, the two agencies mislead people by allowing them to believe that the credit score they are selling is that which is used by lenders to determine loan terms.
As I explained here, Equifax, for example, communicates the FICO score to consumers while lenders rely on the Beacon score, another calculation method. With a good FICO score, a person might think they have access to advantageous loan terms, but they could quickly become disillusioned if their Beacon score was less admirable, which is not exceptional.
But what led to the convictions of the two agencies is the marketing around their package which allows you to view your credit report and know your credit score at all times. This service is also offered in Canada by the two agencies on their website. At Equifax, this subscription costs $19.95 per month and at TransUnion, $16.95. The companies are not advertising free months or a $1 starting offer here. Conversely, an internet user who wants to obtain their credit score and report just once, which costs about $20, can easily end up with the subscription without wanting to.
On the Equifax site, the user will think this is the only option available. This service offer takes up the entire home page. On the TransUnion site, one could accuse the company of trying to mystify the customer. It invites you to click a big button to know your credit score. This will bring you to a form to purchase the monthly subscription. On the right of the page, it says in a small box “You have chosen: TransUnion credit monitoring for $16.95 per month,” while this is not at all what you intended to choose – you just wanted to get your score.
I don’t know if a customer can easily get rid of this subscription, whether they signed up by mistake or knowingly. Looking at the tricks deployed to get you subscribed, I doubt that they will let you go easily. But this is an impression, and I have no desire to test it. That said, Equifax and TransUnion were forced to review several of their practices in the United States following the American CFPB ruling. In particular, the two agencies must ensure that consumers can easily cancel their subscriptions.
We have not yet discussed the service we get in return. I don’t know about you, but I have never woken up with a start during the night wondering, “What the hell is my credit score?” I don’t feel the need to know this information all the time, especially when, knowing that it doesn’t match the score given to lenders, its usefulness is highly questionable.
The subscriber also has the right to a monitoring service that will notify them when important changes affect their report in order to prevent identity theft – in other words, never. Equifax also offers “identity theft insurance.” I haven’t analyzed the policy offered, but anyway, on the priority scale, this product is far from the top. I would say it’s at groundhog level, underground. Banks bear the most frequent costs of this type of crime, credit card fraud.
TransUnion, for its part, offers “powerful tools” that allow you to know “the impact of your debt on your finances with your debt-to-income ratio” (phew!).
Excel is powerful too, much more powerful than is necessary to do a little math that a high school student can do by hand.
Both agencies pretend to want to help you improve your financial situation. The best decision in this regard is to, first of all, ignore their offers. You can obtain all your credit report information free of charge by requesting it on the Equifax site, but the report will be mailed to you. This is sufficient to check that your report does not contain errors or anomalies, and to request corrections if necessary.
However, this free service does not give you access to your score. If you want it, you can also get it free of charge from ratehub.ca. And this does not guarantee anything about the conditions under which you can borrow.
