FICO v VantageScore, is the battle over?

New developments in the FICO v VantageScore lawsuit.  The following are two releases from the parties…

Statement by VantageScore

VANTAGESCORE SOLUTIONS AWARDED ANOTHER COMPLETE COURT VICTORY AGAINST FICO

U.S. Court of Appeals for the Eighth Circuit Affirms All Earlier Decisions in Favor of VantageScore Solutions, LLC

STAMFORD, Conn., August 17, 2011 – VantageScore Solutions, LLC, the company that produces VantageScore, a generic credit score developed as a joint venture among the three national credit reporting companies (CRCs), announced today that a three-judge panel from the U.S. Court of Appeals for the Eighth Circuit issued a decision rejecting an appeal filed by Fair Isaac Corporation (FICO).

The Eighth Circuit Court of Appeals’ decision vindicates VantageScore again by affirming all earlier outcomes, including a July 2009 grant of summary judgment by Judge Ann D. Montgomery of the U.S. District Court of Minnesota and a November 2009 federal jury verdict.

In July 2009, Judge Montgomery rejected as a matter of law FICO’s claims of anti-competitive behavior, false advertising, and unreasonable and illegal restraint of trade. The Eight Circuit affirmed that ruling in its entirety.

In November 2009, the federal jury determined that FICO had no trademark rights in its scoring range, and therefore that the VantageScore® numeric range could not constitute trademark infringement, another determination affirmed by the Eighth Circuit. As a result, the District Court’s order to cancel FICO’s trademark registration of the numerical scale of 300 – 850 remains in place.

“I’m extremely gratified to put this lawsuit behind us and I look forward to an open market free from the encumbrance of litigation,” said Barrett Burns, president and CEO of VantageScore Solutions. “This is a complete victory and ultimately consumers and lenders will benefit from healthy competition in the credit scoring marketplace as VantageScore has already raised the bar for credit scores in terms of predictiveness, inclusiveness, and consistency.”

FICO filed the lawsuit in October 2006 following the launch of the VantageScore credit scoring model by Equifax, Experian and TransUnion, claiming the three credit reporting companies, along with VantageScore Solutions, were engaging in unfair and anticompetitive practices that would harm the FICO credit score brand.

The VantageScore® system is used by numerous lenders, making billions of decisions annually, including four of the top five financial institutions, five of the top five credit card issuers, two of the top five auto lenders, and one of the top five mortgage lenders. Recent media reports disclosed that banking giant Chase adopted VantageScore® in January of 2011. Secondary market participants including Fitch and S&P also rate securitized loan package issues using VantageScore®.

Statement by FICO

Although our efforts thus far have not resulted in a favorable legal settlement, they have helped to advance the important national issue of transparency and fairness when consumers obtain their credit scores. At a time when consumers most need clarity regarding their creditworthiness, it’s imperative that they understand whether the credit scores they purchase are FICO^® scores, which are used by most lenders to make lending decisions, or merely lookalike scores not actually used by lenders to make lending decisions. These lookalike scores can differ significantly from a consumer’s actual FICO^® Score, misleading consumers into believing they have higher or lower FICO scores than actually is the case.  As recent economic events have demonstrated, consumers need clarity about their creditworthiness now more than ever.

Our lawsuit and our interaction with regulators and legislators have helped to bring these issues to national attention. Several weeks ago the Consumer Financial Protection Bureau issued a report to Congress which commented on potential consumer confusion and stated: “Believing he or she purchased a FICO score may lead to dissatisfaction upon learning otherwise. Most importantly, the consumer may be frustrated to learn that they cannot know exactly how a creditor will view them.” Similarly, last year Congress mandated that consumers should receive the same credit scores used to make credit decisions when lenders provide risk-based pricing or adverse action notices. In most cases those will be FICO^® Scores.

This court decision will have little impact on FICO’s business, as FICO^® Scores remain the most trusted and most used measure of consumer credit risk among lenders.

We are continuing to evaluate our options in this litigation.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Report, Credit Score, Money & Identity

This post was written by John Ulzheimer