E-Loan Inc., which flouted rules of Fair, Isaac & Co. by offering free credit scores to consumers, last week found itself cut off from its data altogether by Equifax, the company that had provided its information.
A fourth company, Credit InfoNet of Davenport, Iowa, got caught in the middle of the fight and was also frozen out from data after it denied Equifax's request to sever its links to E-Loan, an online lender based in Dublin, Calif.
The four-way tangle has prompted outrage on all sides. The chief executive officer of Credit InfoNet - the middleman that says it was caught off-guard - is threatening to sue Equifax over the incident. E-Loan, meanwhile, is circumventing Fair, Isaac and Equifax by getting Fico scores another way and continuing to supply them to consumers.
"We never did this with the intention of defying the credit bureaus," said Sharon Ruwart, vice president of marketing for E-Loan. "The point was to show consumers a key piece of information that affects lenders' decisions."
Consumer response has been "tremendous," Ms. Ruwart said. E-Loan officials declined to say where they are now getting Fico scores, but an executive close to the situation said Trans Union is making them available through Credit InfoNet.
But Fair, Isaac said this practice is a flagrant transgression of its rules. "Our contracts with the three main credit bureaus prohibit the disclosures of scores to consumers outside of a lender's explanation to a consumer about a credit decision," said Craig Watts, consumer affairs manager for Fair, Isaac. E-Loan's actions are "an unauthorized disclosure of credit scores."
E-Loan started this practice Feb. 22 through its My E-Loan service, which helps borrowers learn about new loan products and changing rates, and gives them personalized debt management information - including credit reports and Fico scores.
Fair, Isaac, which creates the models for the scores, did not know E-Loan was doing this. Nor did Equifax, which calculates the scores internally and funnels them to Credit InfoNet, the intermediary through which E-Loan receives the scores. Fair, Isaac and Equifax said the actions by Credit InfoNet and E-Loan violated several contracts.
"When this came to our attention, we had not been contacted nor did any party involved seek the approval of Equifax or Fair, Isaac," said William J. Calpin, senior vice president at Equifax. "We had no knowledge this was happening."
The events of the last six weeks have become a quagmire of conflicting and emotional accounts, but the situation came to a head April 3, when Equifax shut off its connection with Credit InfoNet. Thomas L. Midkiff, chairman and chief executive officer of Credit InfoNet, said he will seek legal redress for this action.
According an official at E-Loan, Equifax contacted E-Loan a few weeks after it started releasing Fico scores and asked that the practice stop. Equifax told E-Loan that it was a contract violation with Fair, Isaac, but E-Loan refused.
Rebuffed by E-Loan, Equifax then approached Credit InfoNet about the problem. Mr. Midkiff of Credit InfoNet said an Equifax marketing representative contacted him March 3, asking about the E-Loan disclosures of Fico scores. Mr. Midkiff told the Equifax representative that though E-Loan had not informed him of the service ahead of time, he supported the effort.
Mr. Midkiff said he heard nothing further from Equifax until the MBA Mortgage Technology Conference on March 22-24 in New Orleans, where his other company, Expressclose.com, was an exhibiting vendor. He said the Equifax marketing representative set up a call with Mr. Calpin of Equifax. During that call, Mr. Midkiff said, Mr. Calpin asked that Credit InfoNet stop providing E-Loan with the scores.
According to Mr. Midkiff, he agreed, but on the condition that Equifax send him a letter requesting the action, so he could show E-Loan that he was not the "bad guy." He came away from the meeting with the understanding that he would receive the letter on Friday, March 24.
But Mr. Midkiff said he never received the letter and left Sunday, April 2, on a business trip to Canada. The next day he received a frantic call from his son Lee, who runs their technology center in Dayton, Ohio.
"Dad, we're in trouble," Lee said to his father, informing him that the Equifax connection was down. Though they at first thought it was a technical problem, calls to Equifax revealed it had shut down the connection because of noncompliance. After Credit InfoNet's chief information officer talked a tech worker at Equifax into turning the connection back on Monday night, Equifax again shut down the connection Tuesday morning.
Mr. Midkiff said he made he was on an airplane phone for hours Tuesday on a flight from Buffalo "trying to save my business." The connection with Equifax was reset after Lee got in touch directly with Mr. Caplin. Mr. Midkiff acknowledged receiving a letter from Equifax on April 3, but said it was "arrogant" and gruffly announced that his service was being cut.
Mr. Midkiff contends that Equifax not only did not follow through on verbal and contractual obligations, but that it made a "vicious and premeditated attack" on his company. He says that Equifax could have terminated the service with just E-Loan, but instead pulled the plug on more than 700 of his customers. "They viciously disrupted service to hundreds of customers who weren't doing anything wrong," he said, adding that he had to send his customers to his competitors all day Tuesday.
Mr. Calpin of Equifax said the disruption of service was very brief, and the service was back up and running on Tuesday morning. He said that though his company could have immediately cancelled Credit Info Net's contract when it first learned of the breach, it tried to resolve the problem amicably for a month - ample time for all the parties involved to cooperate.
As far as Mr. Midkiff's request for a written statement absolving Credit InfoNet from being the "bad guy," Mr. Calpin said, "Our contracts do not require anything but a notice to terminate, and it doesn't require that notice be in writing." The prohibition of giving out Fico scores to consumers was "already in writing in the contract."
Besides, he said, Mr. Midkiff "knew we had stepped up and had conversations with people he was dealing with"; E-Loan knew the complaints were coming from further up the food chain.
But there was "no attempt to cure" the breach of contract, so after a month, "we took the only action left to us, which was our contractual right all along," and temporarily suspended its service to Credit InfoNet, he said.
"We voiced our concern about E-Loan's service, disclosing credit scores, and got the impression they were doing it simply to increase traffic to their Web site," said Mr. Watts. "The reason we object is because in our view, consumers need additional information and counsel from a lender in order to truly understand their credit standing and how to improve that in the eyes of the lender. Just providing a score doesn't provide the consumer with useful information."
"I am going to push for change in D.C. I think what they did to me is absolute despicable. This was viciously misdirected," Mr. Midkiff said. "They had another alternative, but that affected their pocketbook, not mine."
When asked if Fair, Isaac would contact Trans Union, Mr. Watts said: "We would continue to discuss any score disclosure that wasn't consistent with our contract. It's our expectation that the credit bureaus will make sure their subscriber agreements will be consistent with their contracts with Fair, Isaac. We want to make sure that all parties involved in credit scoring can benefit from the tool, and not be misled and hurt by it."
Some of the companies involved "want to make this an emotional issue," Equifax's Mr. Calpin said. But despite whatever intentions E-Loan might have had by giving Fico scores to consumers, "this was a breach of contract."