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TransUnion Settles Class Action Lawsuit for $23 Million

In a significant legal development, TransUnion, one of the three premier credit reporting agencies in the United States, has reached a staggering $23 million settlement in a class action lawsuit. The settlement addresses claims that for nearly a decade, the company failed to adequately remove disputed hard inquiries from consumer credit reports. This decision, preliminarily approved by the U.S. District Court for the Eastern District of Pennsylvania in February 2025, may influence over 485,000 consumers, allowing eligible individuals to potentially receive up to $160 each.

The Allegations Against TransUnion

The class action suit was initially filed in December 2018, with plaintiffs asserting that TransUnion neglected to properly investigate or remove certain disputed hard inquiries listed on credit reports from 2016 to 2025. As outlined in the complaint, these practices allegedly violated the Federal Fair Credit Reporting Act and unwarrantedly diminished the plaintiffs’ credit scores.

According to court documents, consumers who contested questionable inquiries received repetitive “502 Letters,” which merely described the nature of credit report inquiries. These letters suggested that consumers contact the third parties themselves rather than taking direct action to remove the inquiries. Plaintiffs argue that TransUnion should have proactively requested that third parties verify and eliminate the disputed inquiries.

While TransUnion has not admitted to any wrongdoing, a representative informed CNBC Select of forthcoming changes to improve consumer handling of hard inquiries.

Understanding Hard Inquiries and Their Impact

What Exactly is a Hard Inquiry?

Credit inquiries fall into two main categories: hard and soft inquiries. A soft inquiry occurs when a consumer is pre-qualified for a credit card or a simple background check is conducted by a landlord; these do not affect a credit score. Conversely, a hard inquiry—triggered by applications for mortgages, personal loans, or credit cards—can negatively impact a credit score. According to FICO, a hard inquiry can cause a drop of approximately five points in a credit score, with the potential for a greater impact on consumers with shorter credit histories or fewer accounts.

Who is Eligible for Compensation from TransUnion?

Eligibility for compensation is extended to consumers who have disputed a hard inquiry on their TransUnion credit report and received a “502 Letter” between December 5, 2016, and January 31, 2025. This eligibility criterion means that hundreds of thousands of consumers may have a rightful claim for compensation due to TransUnion’s alleged failures.

Projected Compensation Amounts

Under the settlement agreement, consumers who received a “502 Letter” will automatically qualify for a minimum cash payout ranging from $20 to $30. Additionally, those who faced specific financial repercussions due to TransUnion’s practices can file claims for further damages, with potential payouts reaching up to $160, depending on the volume of valid claims submitted.

• To qualify for the higher payout, class members must confirm at least one of the following:
• Your credit score with TransUnion decreased due to the disputed inquiry.
• TransUnion sent out a report that included the disputed inquiry to a third party.
• You were denied credit, even partially, because of the disputed inquiry.

How to File a Claim

Class members do not need to take action to receive their minimum payout, which will automatically be sent to the address used by TransUnion to distribute the “502 Letters.” Consumers with address changes or those who wish to request additional damages must submit a claim form through the class action settlement website before June 24, 2025.

Alternatively, claim forms can also be mailed to:

Norman v. TransUnion, LLC
c/o Settlement Administrator
PO Box 23489, Jacksonville, FL 32241

Please note that the deadline for raising objections or seeking exclusion from the settlement is also June 24, 2025.

Tentative Payment Schedule

Payments are anticipated to be distributed within 90 days following the final hearing scheduled for July 21, 2025. However, potential appeals and injunctions could extend this timeline.

FAQs Regarding the TransUnion Settlement

What is a hard inquiry?

A hard inquiry involves an exhaustive assessment of your credit history to evaluate your creditworthiness. One hard pull typically decreases your credit score by less than five points. However, for individuals with shorter credit histories, the effect can be more pronounced. Additionally, multiple hard inquiries over a short timeframe can broadly impact your score.

How can I determine if a hard inquiry was made on my credit?

Your credit report will indicate when an inquiry was performed, allowing you to monitor your credit score and identify potential fraud if an unknown inquiry appears.

What is the deadline to file a claim in the TransUnion settlement?

Individuals accepting the minimum settlement do not need to file a claim. However, those who believe they experienced specific financial challenges must complete a claim form on the class action settlement site by June 24, 2025.

Defining TransUnion’s Role

Alongside Equifax and Experian, TransUnion serves as one of the leading credit reporting agencies that furnish essential data on individual financial behaviors, utilizing this information to compile credit scores. These scores play a critical role in determining an individual’s creditworthiness and influencing decisions related to employment and insurance, among other factors.

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