PITTSBURGH (CN) – An antitrust class action claims major lenders and credit raters conspire to restrain the availability of consumer loans, fixing prices and sharing information, refusing credit to consumers who are unable or unwilling to pay monopolistic prices for loans. The class claims there is “no economically rational reason” that lenders would share information about their customers.
Named as defendants in the federal complaint are JPMorgan Chase, Bank of America, Discover, Experian, Transunion, Equifax, FICO and Vantagescore Solutions,
Lead plaintiff Karin Black claims that JP Morgan, Bank of America and Discover control 87.5 percent of U.S. consumer loans. She claims that Experian, Transunion and Equifax store and control the credit data of more than 85 percent of all debtors, and FICO and VantageScore dominate the credit scoring industry by providing more than 85 percent of the credit scores to lenders.
Black claims that through price floors, accelerated defaults, punitive fees, tying and lockstep pricing, and the creation and sharing of credit scores, the defendants force consumers “to either submit to higher monopolistic prices or default and thereby be excluded from the credit market for at least seven years.”
Black says that credit bureaus “act as information clearing houses holding proprietary data on over 1 billion debtors internationally” and “assist and promote parallel action among competitors” by immediately notifying all lenders in real time to raise rates and to adjust credit in unison when one single competitor reports a negative event or a high balance.
According to the complaint, data shared through consumer credit histories include information such as balances owed, interest rates offered, credit lines offered, extent of credit debt, product purchasing history and payment history for each of the lender’s customers.
The credit scoring system honors the “most profitable customers” by giving them lower scores in order to rapidly identify them and “fix rates accordingly,” Black says. Credit scores are lowered when consumers pay off credit cards, even though such an act reduces credit risk; this shows that the system is “not used to asses risk but rather fix and manipulate pricing,” Black says.
Black says. “these consumers represent the lowest default risk of all and should be the most sought out customers.” Instead, she says, the only the class can “avoid punishment [of a low credit score] is to obtain and maintain credit that the consumer does not need and, as a consequence, pay monopolistic prices simply to preserve a good credit score.”
The cartel pricing singles out classes to “pay the highest price they can possibly afford,” Black claims. She says that the lenders are “motivated to report negative events in order to decrease the credit rating and increase the number of customers paying at the ‘high risk’ rate.”
Black claims that there is “no economically rational reason” that lenders would share customer information.
She says that “in a competitive industry consumer data is considered proprietary and closely guarded by trade secret law because such data provides a competitive advantage.”
The lenders “all share customer data in a quid pro quo arrangement among themselves to set higher prices by reporting to and utilizing credit bureaus to distribute information,” and “have used their near complete monopoly to increase prices for the low risk debtors, and accelerate default of debtors in distress in order to exclude them from seeking non-monopolistic loan terms,” according to the complaint.
She claims that lenders boycott customers who cannot afford to pay inflated, monopolistic prices by telling them to “take it or leave it” or denying them credit.
Black seeks class damages for antitrust violations, disgorgement of money illegally obtained as a result of unlawful activities, restitution and an injunction preventing the putative competitors from sharing consumer information.
She is represented by Matthew Kurzweg.