CFPB says TransUnion, former executive repeatedly broke law

Consumer Financial Protection Bureau Director Rohit Chopra followed through Tuesday on a recent warning that he would penalize individual executives at companies suspected of repeated violations.

The CFPB announced a lawsuit against the credit bureau TransUnion for allegedly violating a 2017 order to stop misleading customers about the credit reporting and monitoring services the Chicago company offers and to disclose recurring charges for them.

The suit also names John Danaher, a former top executive at TransUnion’s Interactive unit, which was responsible for selling the products to consumers.

Danaher delayed reforms required under the 2017 order that would have ended the company’s allegedly abusive practices in order to continue generating revenue — and to allow him to cash in $10 million from stock under his compensation plan, according to the lawsuit.

TransUnion and attorneys representing Danaher, in separate statements, denied the claims made in the CFPB suit.

The suit is considered one of Chopra’s biggest enforcement actions since his Senate confirmation in September. Last month, Chopra promised the agency would go after top executives at companies that repeatedly break the law.

The CFPB is seeking customer relief and penalties from TransUnion and Danaher. They are in addition to the fines and restitution that TransUnion had to pay under the 2017 order.

Both sides were in discussions over a settlement in the months before the new lawsuit was revealed, but a deal could not be reached, according to a source familiar with the talks.

Danaher, who had been at TransUnion since 2004, transitioned into an advisory role in April 2021 and retired in February, according to a securities filing by the company last year.

“Rather than comply with a law enforcement order, John Danaher appeared to take a risk that violating the order was worth the increased revenue and profit,” Chopra told reporters in a briefing Tuesday.

The CFPB is also prepared to amend the complaint to include any other executives if more information is uncovered during legal proceedings, Chopra said.

A senior CFPB official told reporters that information is shared with state licensing boards and other agencies for repeat offenders. But the official said it was beyond the scope of the complaint to speculate on what state licensing offices would do.

The suit against Danaher signals a “major shift” toward targeting executives at big companies after the bureau has preferred to bring cases against those at smaller firms in the past, said Chris Willis, a partner at Troutman Pepper.

“It is likely intended as —and should be seen as — a warning to executives in consumer financial services companies,” Willis said of the suit against TransUnion and Danaher.

Since being ordered to set aside $13.9 million in restitution and paying a $3 million fine to settle the charges outside of the court process, TransUnion continued to rack up complaints about its service, according to the bureau’s Consumer Complaint Database. The company has argued that many complaints levied against TransUnion should actually be directed toward creditors reporting debts.

The bureau alleges in the new lawsuit that the company did not receive authorization from customers before making recurring withdrawals from their bank accounts.

TransUnion was also alleged to have engaged in so-called “digital dark patterns” designed to influence customer behavior. For instance, the bureau claims TransUnion offered “brightly colored buttons” advertising one-time snapshots of their credit and instead allegedly duped customers into ongoing subscription services.

Danaher allegedly instructed staff not to use an “affirmative selection box” required for customers under the previous consent order, because he determined it would slow down enrollments, according to the suit.

“I do not take the decision to charge individuals lightly,” Chopra said. “Based on the evidence uncovered in the investigation, I believe it was appropriate that he be named individually and answer our allegations.”

TransUnion is not providing legal services for Danaher, who is being represented by Jeff Knox and Brooke Cucinella at Simpson Thacher & Bartlett.

“These claims are without merit, and this lawsuit demonstrates that the CFPB is focused more on politically expedient headlines than the facts or the law,” Knox and Cucinella said in an emailed statement. “Mr. Danaher very much looks forward to his day in court.”

In a press release announcing the suit, Chopra called TransUnion an “out-of-control” company that felt it was above the law.

TransUnion said in its statement that it had submitted a plan to make changes, which the bureau allegedly ignored. The company said bureau leadership refused to meet to resolve the issues and that it would defend itself in court.

“Rather than providing any supervisory guidance on this matter and advising TransUnion of its concerns — like a responsible regulator would — the CFPB stayed silent and saved their claims for inclusion in a lawsuit, including naming a former executive in the complaint,” the company said.

Consumer advocates have applauded the move and are using the lawsuit to argue for a government-run credit bureau, which has become a topic of debate in Washington.

“Federal regulators, state attorneys general, consumer advocates and private attorneys have been battling a culture of impunity and arrogance by the credit bureaus for decades,” Chi Chi Wu, staff attorney at the National Consumer Law Center, said in a press release Tuesday. “We need to have an alternative to the credit bureau cartel.”