TransUnion (NYSE:TRU), a leading credit reporting agency, is grappling with two settlements totaling $23 million handed down by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). The company has been accused of inaccuracies in rental background checks and alleged non-compliance with security freeze and lock requests, leading to these penalties.
The most recent allegations stem from officials including CFPB Director Rohit Chopra and FTC’s Bureau of Consumer Protection Director Samuel Levine charged TransUnion with violations of the Fair Credit Reporting Act (FCRA). They claimed the company failed to protect military members from identity theft, had inaccuracies in eviction records, and misused pre-screened solicitation lists.
TransUnion's subsidiary, Rental Screening Solutions, was also found to provide landlords with erroneous tenant data. This could have led to wrongful housing denials or unjust rent increases. In addition, the company reportedly incorrectly processed about 40,000 credit report freezes and locks requests.
For these alleged missteps, TransUnion has been ordered to pay $15 million for inaccuracies in rental background checks and withholding third-party sources of inaccurate data. An additional fine of $8 million was levied by the CFPB for allegedly deceiving consumers about security freezes and locks on credit reports.
Of the total settlement amount, $14 million will be paid directly to consumers affected by these issues, with $9 million allocated as penalties. As part of the settlement, the company will also pay $11 million to customers affected by eviction misreporting and an additional $4 million fine.
Despite these penalties, TransUnion denies any wrongdoing. In their response to HousingWire, they stated that they have corrected underlying issues in 2020 and are committed to reforming their business practices.
This is not the first time TransUnion has faced legal action from federal regulators. In 2017, the company was ordered to cease enticing customers into costly subscription plans. The following year, it faced a lawsuit for alleged non-compliance with this order.
The CFPB's actions against TransUnion are part of wider scrutiny of the background check industry. The bureau has previously fined Experian (OTC:EXPGF) $3 million and was part of a coalition that resulted in a $700 million settlement from Equifax (NYSE:EFX). A 2021 CFPB report highlighted shoddy practices leading to cases of mistaken identity within the industry.
In spite of these legal troubles, TransUnion's financial performance remains solid. According to InvestingPro data, the company has a market capitalization of $13.29 billion and has reported a gross profit of $2.447 billion, representing a healthy gross profit margin of 65.29%. The company's revenue growth has been positive, albeit slowing, with a reported growth rate of 10.17% in the last twelve months.
Moreover, the company's P/E ratio stands at 57.34, indicating that the market has high expectations of its future earnings. The InvestingPro Tips suggest that TransUnion's strong earnings should allow it to continue dividend payments, and that the company's net income is expected to grow this year. This is further supported by the fact that the company's liquid assets exceed its short-term obligations, providing a solid financial buffer against potential future penalties or settlements.
TransUnion's commitment to reforming their business practices and their strong financial performance may provide some reassurance to investors. For more detailed insights, consider subscribing to InvestingPro, which offers additional tips and real-time metrics about the company. Subscribers can access these insights here.
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