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See more recent story: Deadline passed for free TransUnion credit monitoring
Further details have emerged about what consumers stand to gain from the settlement of a class action lawsuit against credit reporting giant TransUnion.
The details revolve around the words “millions” and “billions.”
As many as 190 million consumers stand to gain free credit monitoring due to the tentative settlement, first reported by CreditCards.com Thursday.
In addition, TransUnion has to fork over $75 million to settle the case.
It could have been worse, according to the lawyers for the consumers, who first sued in 1999 to stop TransUnion from selling too much information about them. They were after as much as $190 billion in damages.
On May 29, after the accumulation of many years in court and many thousands of pages of documents, the tentative settlement of that class action lawsuit was announced, giving a majority of Americans free round-the-clock access to their credit reports and credit scores. Additionally, consumers would receive e-mails updating them about any significant changes to their credit files, such as late payments or accounts opened in their names.
“We are very pleased with the settlement and believe it is an excellent result for the class,” says Chris Micheletti, a lawyer with Zelle, Hofmann, Voelbel, Mason & Gette, LLP and attorney for some of the plaintiffs. “We are gratified that we were able to negotiate such a beneficial settlement package for the class members after so many years of hard-fought litigation and given the significant and challenging legal issues presented by the case.”
While the settlement may provide satisfaction for millions of borrowers, they will have to be patient — registration at the settlement Web site doesn’t begin until June 16.
$75 million settlement fund
The settlement will cost TransUnion a minimum of $75 million. That’s the size of the “settlement fund” it is required to create through an escrow fund.
In addition to getting free credit monitoring, consumers can claim a portion of that money by registering on the soon-to-be-created Web site at listclassaction.com.
The cash value — payable after two years — may not amount to much.
First, $6 million is going immediately to “expenses of the notice administrator and the claims administrator.” The court reserved to itself to determine how much will go to consumers’ lawyers, but TransUnion agreed not to squawk if lawyers’ fees don’t exceed 25 percent of the fund — $18.75 million. Each named plaintiff will get up to $3,750 from the settlement to compensate them for their time, “including their attendance at hearings, sitting for depositions and consultation with counsel.”
That would leave somewhere around $40 million — to be divided among as many as 190 million Americans. Don’t spend all your 21 cents.
Even if the average consumer stands to gain less than two bits, it’s certainly no two-bit settlement to TransUnion. The settlement fund “represents full disgorgement of TransUnion’s relevant profits,” according to the settlement document.
Beginning in 1999, the company was accused in 14 different lawsuits of violating the Fair Credit Reporting Act by disclosing more information about consumers than the law allows to marketers of insurance and credit products.
The chief benefit of the settlement — free credit score monitoring — goes to those who use the Internet. Like a cable TV service, the credit monitoring service will have two levels — basic and enhanced. However, unlike cable service, it will be free.
From the settlement:
“TransUnion shall provide six months of the TransUnion credit monitoring service (which consists of (i) free unlimited daily access to a Settlement Class Member’s TransUnion credit report and Credit Score; (ii) ‘credit monitoring,’ a 24hour e-mail credit notification service (with certain other components customarily provided by TransUnion with sale of this product) having a retail value of $59.75, to all class members who request it.”
“Simultaneously with offering settlement class members the basic relief … TransUnion shall offer an alternative enhanced set of services that class members can select in exchange for a full release of claims. This enhanced set of services shall consist of nine months of TransUnion credit monitoring, a suite of insurance scores, and TransUnion’s mortgage simulator service, having an aggregate retail value of $115.50.”
To get the basic, six-month monitoring, consumers have to promise not to join another post-settlement class action lawsuit. For the nine-month enhanced free service, consumers have to give up all their rights to make further legal claims against TransUnion.
Many free trials turn automatically into a paid service unless consumers remember to shut them off. This one won’t. After the free period expires, the service will be discontinued automatically. In addition, you won’t have to put up a credit card number to get the service.
The settlement cost to TransUnion could have been much worse: The consumers’ lawyers were estimating that TransUnion could have been hit with a penalty of $100 to $1,000 for each person affected. With an estimated 190 million people affected, TransUnion was exposed to damages of $19 billion to $190 billion, they argued.
Still unfolding is how this settlement will affect others that sell credit score monitoring services. When one of the industry’s giants is giving it away, how can others in the field — such as Experian, Equifax and freecreditreports.com — hope to sell it? This settlement must have hit them, as the jingle for freecreditreports’ TV ad says, “like an atom bomb.”
Even for free, credit monitoring may be worth little more than the price tag, says personal finance columnist and author of “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life” Liz Pulliam Weston. “Credit monitoring has limited value for the typical consumer who isn’t in the market for a major loan and isn’t at high risk of becoming a victim of serious identity theft” such as the fraudulent opening of new accounts in their name, Weston says. “Credit card fraud, where someone steals your card or your account number, is usually no big deal and doesn’t warrant credit monitoring.”
“Credit monitoring doesn’t prevent identity theft but can give you early warning that there’s a problem, which can help you get started on clearing your name,” Weston says.