Score Wars
by Steve Cypher on Tuesday, July 28th, 2009The court battle between FICO and VantageScore continues as the US District Court in Minneapolis dismisses antitrust and false advertising claims by FICO against VantageScore but allows trade infringement as well as unfair competition and passing off claims to be heard.
The news
Here at Auto Credit Express, we realize that knowing your credit score is absolutely vital to all bad credit car loan customers. But you also need to know that there is more than one credit score out there and the outcome of a recent court decision could very well affect what this score will look like in the future. You might also think from recent press releases that both sides of the FICO – VantageScore battle had won a significant victory this week.
The background
In case you were wondering, the brouhaha between the two competing credit scoring models began three years ago when the big 3 credit bureaus (Experian, Equifax and TransUnion) launched their own credit scoring model called VantageScore in an effort to corral some of the lucrative scoring business, themselves, while reducing royalties that all three were paying to Fair Isaac (the company that created the FICO score).
Originally, FICO (the new re-branded name of Fair Isaac) brought suit against the three bureaus claiming trademark infringement, misleading consumer advertising and unfair competitive tactics. Today, U.S. District Judge Ann Montgomery dismissed the false advertising and antitrust claims, but denied the motions by both Experian and TransUnion (Equifax was dropped from the lawsuit in 2008 after both companies agreed to jointly develop and launch decision-management and scoring products) to throw out trademark-related complaints.
Spin cycle
From Experian:
“We are delighted that the Court dismissed FICO’s antitrust and false advertising claims,” said Kerry Williams, Group President of Credit Services and Decision Analytics at Experian. “It has always been our position that FICO’s claims were without merit and were filed with the anticompetitive goal of perpetuating FICO’s long-time dominance in credit scoring and eliminating new competition brought by VantageScore. We are particularly gratified that the Court found that VantageScore represented ‘the very essence of competition.’”
“The Court’s ruling represents a victory not only for Experian and its co-defendants but also for customers, consumers and competition in the credit scoring market,” said Williams. “VantageScore has introduced innovation, choice, and competition into a marketplace that long had been dominated by FICO.”
From TransUnion:
“The court’s decision dispels a perception that there can be only one scoring model that holds relevance for lenders and consumers,” said Jeff Hellinga, president of TransUnion’s U.S. Information Services division. “The outcome is a victory for the kind of choice, clarity and consistency that the marketplace demands and deserves.”
From FICO:
“This suit is about two things: fairness and consumer protection,” said Mark Greene, chief executive officer at FICO. “At a time when consumers most need clarity regarding their creditworthiness, it’s imperative that they understand whether or not the credit scores they purchase are industry-standard FICO® scores, or merely lookalike “educational” scores not actually used by lenders to make lending decisions.”
With respect to the antitrust claims, the Court’s finding was largely based on VantageScore’s lack of adoption in the lending marketplace, and thus a lack of any injury to FICO. Because the decision was based on FICO’s lack of injury, the Court did not rule on the legality of VantageScore.
Stay tuned
Currently, the FICO score is the dominant credit score here in the U.S. But depending on the results of the current court battle, things might be changing in the future.
Tags: credit score, equifax, experian, fair isaac, fico, Fico Score, transunion, vantagescore
