FICO Corp. Under DOJ Scrutiny

March 17, 2020

The Department of Justice will be conducting a civil investigation into FICO Corp.—the company formerly known as Fair Isaac Corp. that calculates credit scores–over alleged “exclusionary conduct” claims. While few details of the investigation have been released, HousingWire reports that “exclusionary conduct” typically refers to an investigation over a company’s activities that have led to market dominance in a particular area.

No information has been released yet on what area of lending or credit system the DOJ is investigating with FICO. However, FICO has emerged as a dominant credit score model used by mortgage lenders. Mortgage financing giants Fannie Mae and Freddie Mac use the FICO credit score model in mortgage underwriting.

One of the main competitors to FICO scores is VantageScore, which was created by the three largest credit bureaus (Equifax, Experian, and Transunion).

“FICO intends to fully cooperate with the Department of Justice and looks forward to a constructive dialogue about the state of competition in our industry,” the company said in a statement. “Lenders have multiple choices of analytic models to use in credit decisions and are free to choose the credit score that works best for them.”

Lenders choose which credit scoring to use for a loan application, so consumers are unlikely to notice any noticeable changes initially, Bankrate.com reports on the investigation.

The DOJ has not released a comment on the pending investigation.

FICO Corp. and the three credit credit bureaus have had a litigious past. In 2006, Fair Isaac sued Experian, Equifax, and TransUnion over VantageScore, alleging antitrust violations. A federal judge sided with the defendants, saying VantageScore did not violate trademarks or engage in unfair competition against Fair Isaac. In 2017, Fair Isaac sued TransUnion, alleging breach of contract, copyright infringement, and other allegations. TransUnion countersued, alleging antitrust violations against Fair Isaac. A Chicago federal judge ruled that TransUnion could move forward with its antitrust allegations.

Fair Isaac’s statement this week on the DOJ’s action refers to past legal battles with TransUnion.

“FICO is confident the Department will conclude that it has not engaged in any exclusionary conduct,” FICO’s statement reads. “To the extend the Department’s inquiry was initiated based on TransUnion’s antitrust claims in the parties’ ongoing private litigation—claims TransUnion made only after FICO filed its lawsuit to recover millions in royalties from TransUnion—we are equally confident the department will find them to be without merit.”Source: “Credit Scoring Firm FICO Hit With DOJ Antitrust Investigation,” Bankrate.com (March 16, 2020)and “DOJ Investigating FICO’s Dominance in Credit Market,” HousingWire (March 16, 2020) andComment