FICO Lawsuit Against Experian and TransUnion to Proceed to Trial
(5/29/2009) - Let the games begin. The United States District Court in Ohio last week denied a motion to dismiss a 2006 lawsuit brought by the Fair Isaac Corporation against Experian, Equifax, and TransUnion, which alleges that the three credit bureaus – the largest in the nation – violated anti-trust, trademark, and false advertising laws in creating a proprietary credit score, called the VantageScore, to rival Fair Isaac’s widely-used FICO score.
At the heart of the lawsuit is FICO’s contention that the VantageScore employs a range of possible scores confusingly similar to FICO’s trademark “300-850” range and that this, combined with misleading advertising about the source and relevance of the VantageScore, would be detrimental to consumers.
“This suit is about two things: fairness and consumer protection,” said Mark Greene, chief executive officer of the Fair Isaac Corporation, more commonly known as FICO. “At a time when consumers most need clarity regarding their creditworthiness, it’s imperative that they understand whether or not the credit scores they purchase are industry-standard FICO scores, or merely lookalike ‘educational’ scores not actually used by lenders to make lending decisions.”
While FICO now has one less defendant to pursue – the company last year reached a settlement with Equifax – this suit should bring no shortage of intrigue given that the plaintiff and remaining defendants are actually business partners. FICO and the three major credit bureaus have a joint agreement, known as myFICO, to sell consumers FICO scores based on the often-differing information within their major credit files.
Update (Nov. 21, 2009): A jury in the United States District Court in Ohio has ruled against FICO, finding that the VantageScore’s 501-990 credit-score range was not confusingly similar to the 300-850 range used by FICO. FICO plans to appeal the verdict, according to the company. “While we’re disappointed by this jury’s verdict, we remain confident in the validity of our claims,” FICO CEO Mark Greene was attributed as saying in a company release.”
This development comes just months after Experian pulled out of the myFICO agreement amidst contentious contract negotiations and rumors of bad blood between the two companies, stemming from their still-ongoing lawsuit.
Update (Aug. 17, 2011): The 8th U.S. Circuit Court of Appeals ruled unanimously against FICO, bringing to a close the company’s lawsuit against Experian and TransUnion.
“Today’s decision once again confirms the value of competition and choice in credit scoring,” said Kerry Williams, president for Experian’s North American credit services and decision analytics in a statement. “FICO filed this meritless case for the sole purpose of eliminating the powerful competition introduced by VantageScore in the credit scoring marketplace and impeding industry innovation. However, every one of FICO’s claims has been repeatedly rejected by the courts.”
FICO nevertheless contends that the lawsuit was effective in the sense that it increased national awareness about the issue of credit score differentiation.
Update (May 14, 2012): Perhaps FICO was correct in claiming that its ill-fated lawsuit against Experian and TransUnion was successful despite the verdicts reached in court. Seventy-eight percent of people now know that more than one type of credit score exists, compared to just 71% in 2011, according to surveys conducted by the Consumer Federation of America.
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