Fair Isaac fules lawsuits against three US credit reporting agencies

Source: Fair Isaac

Fair Isaac Corporation (NYSE:FIC) filed suit yesterday in Federal Court in Minneapolis alleging that the three national credit reporting agencies and a jointly owned entity have violated antitrust laws and engaged in unfair competitive practices.

In its suit, Fair Isaac alleges that Equifax Inc., Experian Information Solutions Inc., TransUnion LLC and VantageScore Solutions, LLC, through their launch and marketing of the VantageScore credit scoring model, are jointly engaging in unfair and anti-competitive practices that harm the FICO® credit score brand and goodwill that Fair Isaac has spent 50 years creating.

"We have competed against the credit reporting agencies' scoring products for many years, and we are happy to compete on a level playing field," said Tom Grudnowski, CEO of Fair Isaac. "However, the recent agreement between the three powerhouse agencies unfairly threatens our ability to compete, and inhibits the ability of consumers and lenders to enjoy the benefits of continued innovation, choice and competition in the credit information marketplace."

Fair Isaac's legal action echoes concerns of prominent consumer advocates that the VantageScore initiative is causing confusion for consumers seeking to understand and manage their credit. "Misleading and confusing marketing claims do not serve consumers' best interests," said Grudnowski.

Currently, the credit reporting agencies sell and distribute FICO® scores directly to lenders. These agencies also own the consumer data on which scores are created, and they have the ability in most cases to set the price a lender pays for both a FICO® score and the score now offered through VantageScore. Citing anti-trust concerns, Fair Isaac believes that this situation allows the agencies to unfairly manipulate the credit score price, sales, and distribution process to promote adoption of their VantageScore product at the expense of fair competition from the FICO score or other credit scoring products.

"The three credit reporting agencies have been our primary U.S. distribution partners for Fair Isaac's scores for more than 15 years," said Grudnowski. "Now, the credit agencies are using their position to drive adoption of their own score to the detriment of our competing FICO score product and in conflict with their obligations to distribute our product."

Among the complaints outlined in yesterday's action are Fair Isaac's contentions that the credit reporting agencies are using false and misleading marketing and advertising claims to promote adoption of the score offered through VantageScore, and that the credit reporting agencies are mischaracterizing Fair Isaac's credit scores. In addition, Fair Isaac believes that the agencies' marketing of a credit score product with a score range that overlaps the trademarked FICO score range of 300-850 is an unfair attempt to profit from confusion caused by the similar score ranges, as well as trademark infringement and a violation of fair trade laws.

Fair Isaac does not expect nor intend that yesterday's action will impair lenders' or consumers' access to Fair Isaac's scores in the immediate future or long-term.

Through yesterday's legal action, Fair Isaac is asking the three credit reporting agencies and VantageScore Solutions, LLC, to stop the unfair competitive activities outlined in the suit, and to conduct business in a way that serves the best interests of the financial services industry and consumers.

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