DOJ opens antitrust probe into credit score giant Fair Isaac - POLITICO

The Department of Justice. | Drew Angerer/Getty Images

The Justice Department has opened an antitrust investigation into Fair Isaac, the financial company whose credit scores underlie nearly all U.S. consumer credit decisions, according to information obtained by POLITICO.

The probe follows years of complaints from rivals about Fair Isaac's dominance, and comes amid efforts by Congress and financial regulators to inject more competition into the credit score market. Fair Isaac's FICO scores are a measure of risk that banks and credit card companies use to make lending decisions, and are used by Fannie Mae and Freddie Mac to determine creditworthiness of mortgage applicants.

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The exact scope of the DOJ’s antitrust investigation isn’t yet known. The agency recently sent letters to Fair Issac and others in the consumer credit industry asking them to preserve documents, according to a person knowledgeable about the case who was not authorized to speak about it. Such hold-letters are the first step in an investigation.

A Justice Department spokesperson declined to comment Friday night.

Fair Isaac founded the FICO score in 1956 and has issued more than 100 billion scores, according to its website. The scores are based on information collected by the three largest credit reporting agencies, Experian, Equifax and TransUnion. The credit reporting agencies also sell FICO scores to lenders.

In 2006, Experian, Equifax and TransUnion introduced their own credit scoring model, known as VantageScore. Fair Isaac sued the three agencies for antitrust violations, but a court later dismissed those allegations. A federal jury later sided with VantageScore that it didn’t violate Fair Isaac’s trademarks or engage in unfair competition.

Fair Isaac also sued TransUnion in 2017 for breach of contract, copyright infringement and other allegations. TransUnion countersued Fair Isaac for antitrust violations. A Chicago federal judge ruled last year that TransUnion can move forward with its antitrust allegations.

Congress and regulators, meanwhile, have sought to lessen Fair Isaac's grip on the credit score market. In a 2018 law that sought to roll back some of the banking reforms in the 2010 Dodd-Frank Act, Congress ordered the Federal Housing Finance Agency to establish rules and criteria for the credit scoring models used by Fannie and Freddie.

A December 2018 proposed rule by FHFA would have effectively prohibited Fannie and Freddie from using VantageScore over concerns about conflicts of interest. But the final rule, issued in August, switched gears and allowed the government-sponsored entities to make use of VantageScore as an alternative to FICO scores.

Fair Isaac and VantageScore didn’t immediately return calls and emails for comment sent after business hours Friday. Experian, Equifax and TransUnion also didn’t immediately respond to requests for comment.

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DOJ opens antitrust probe into credit score giant Fair Isaac - POLITICO
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