Alleged Use of Consumers’ Credit Score Without Proper Notice Results in $600,000 Settlement

  • The Consumer Financial Protection Bureau (“CFPB”) and Arkansas AG Leslie Rutledge reached a settlement with home-security company Alder Holdings, LLC (“Alder”) to resolve allegations that it used consumers’ credit scores to price their offerings without providing proper notice in violation of the Fair Credit Reporting Act and its implementing regulation, Regulation V, and the Dodd–Frank Wall Street Reform and Consumer Protection Act.
  • The complaint alleged that Alder charged different amounts for the activation fee of its security system equipment on the basis of consumers’ credit scores, with the fee amount being generally inversely correlated with the credit score. Alder allegedly did not provide notice of its risk-based pricing to consumers and did not notify them that their credit scores may impact whether they will be charged an activation fee and the amount of the fee.
  • Under the terms of the proposed stipulated judgment, Alder will pay a $600,000 civil money penalty to the CFPB, of which $100,000 will be remitted if Alder pays that amount to Arkansas to settle a related lawsuit filed by AG Rutledge and pending in state court. Alder also agreed to provide proper notices to consumers and to submit for review a comprehensive compliance plan to the CFPB.