More than 160 million Americans would be able to learn their all-important credit scores at no charge -- and with no strings attached -- under a settlement by credit reporting giant TransUnion Corp. of a long-running class-action lawsuit.
The agreement would entitle consumers to at least six months of a TransUnion monitoring service, giving them access to the latest information in their credit reports as well as their current scores at any time.
The service also would notify consumers by e-mail of significant changes to their files, including reports of late payments or accounts opened in their names. The latter information could help thwart attempted identity theft.
TransUnion normally sells the service for $59.75 or more, giving the settlement a value that could top $10 billion.
Extracting free services from an industry that many Americans love to hate could give them a measure of satisfaction. On a more practical level, the information could be especially useful for people who are borrowing more because of difficulties caused by the slowing economy or who simply want to find loans or cards with better terms.
Ken McEldowney, executive director of Consumer Action, a national advocacy group based in San Francisco, called the settlement mind-boggling.
“It’s everything we tell consumers that they need to find out if they have problems with their credit,” he said. “They are getting information on how to improve it and information about whether they are creditworthy. This is astonishing.”
A credit report supplied by TransUnion or its rivals, Equifax Inc. and Experian, contains information about your current and recent home and auto loans, credit cards and other credit accounts, including how much is borrowed, your credit limits and whether payments are made on time.
A credit score, which is calculated using a formula based on that data, is a three-digit number that can determine what interest rate you pay on a loan or credit card, or whether you even are approved for one.
Federal law entitles everyone to a free copy of his or her credit report once a year from each of the three major credit-reporting companies, but it doesn’t provide access to credit scores.
The case being settled stems from a business operated by TransUnion that sliced and diced data from the Chicago-based company’s massive credit files to generate customized lists of consumers. Retailers, lenders and other businesses would buy the lists to use in their marketing.
Federal law bars the sale of a person’s private credit information except under certain circumstances, such as when he or she has applied for a loan.
Although companies can gather and sell public consumer information, such as mortgage lien information that’s filed with counties, plaintiffs in dozens of suits argued that TransUnion had overstepped those bounds, violating privacy protections.
The plaintiffs alleged that anyone who had a credit file maintained by it had suffered damages, mainly by being inundated with junk mail from marketers who bought data about them.
The suits were combined into one class action in federal court in Chicago. TransUnion and the plaintiffs in that case agreed to a preliminary settlement Wednesday. It requires final court approval, which is expected in September.
Based on the number of people in the class, the settlement would be the largest in U.S. history, said Peter A. Chapman, editor of the Class Action Reporter.
“This was a long, hard fight and an excellent result,” said John Zarian, a Boise, Idaho, attorney whose clients -- some of the original plaintiffs in the case -- filed suit 10 years ago.
TransUnion, which discontinued the list-marketing business in 2001, has said it didn’t violate the law.
“TransUnion is committed to providing consumers with tools and services that empower them to manage their own credit health,” said Colleen Ryan, a spokeswoman for TransUnion. “The services offered through this settlement complement our many consumer-empowering initiatives.”
Under the settlement, anyone who had any type of loan account between January 1987 and Wednesday would be able to select one of two options:
* A basic service would provide free credit monitoring for six months. It normally retails for $59.75, according to the settlement. Those who select this service can also apply for a cash payment.
* An enhanced service would provide nine months of free monitoring, plus use of a “mortgage simulator” that lets consumers see whether improving their credit score would affect their mortgage rates and how much they could save if it did.
This option also includes access to one’s insurance score, which is used by some insurers to set rates (though California bars their use). The settlement values this option at $115.50.
Under the settlement, a credit card number would not be required to sign up for either service. After the free service ends, TransUnion could not charge for an extension unless it was requested by the consumer.
The agreement also creates a $75-million fund that would be used to notify class members about their rights, to pay attorneys and pay any damages agreed to for people who opt out of the class and sue TransUnion on their own. If there is money left in the fund after two years, it would be paid to people who applied for the cash. Consumers who received the enhanced service don’t have the right to apply for the money.
Claims can be filed starting June 16 by going to the settlement website at www.listclass action.com or calling (866) 416-3470.