Potential FICO Price Hike Raises Ire of Politicians and Lender Group
Written By: Joel Palmer, Op-Ed Writer
Politicians and a mortgage industry group have expressed concern about Fair Isaac Corporation (FICO) this month, which coincided with the mere suggestion recently that FICO might raise the cost of credit reporting.
A group of 34 Democrat U.S. senators and representatives, led by Senator Elizabeth Warren (D-Mass.) and Representative Jamaal Bowman (D-N.Y.), wrote a letter to President Joe Biden urging action on a number of initiatives to lower housing costs.
“Under your leadership, the Biden-Harris Administration has taken important steps to protect renters from predatory corporate landlords and to make home purchases and refinancing more affordable,” wrote the lawmakers. “But there is even more that can be done using executive agencies’ existing statutory authority.”
The letter addressed four areas the administration and federal agencies should focus on, including:
Price gouging by rental landlords
Junk fees assessed to renter and homeowners
Promoting housing development on federal property
Lowering credit report costs
In the section of the letter addressing credit report costs, the legislators wrote that FICO “enjoys a near monopoly in the credit scoring market” and the cost to obtain a score from FICO has “increased by as much as 400 percent” since 2022.
The letter also stated: “The Department of Justice (DOJ) and CFPB should address anti-competitive behavior in the credit scoring market that jacks up prices for consumers. The DOJ should investigate whether FICO and others are engaging in behavior that violates federal antitrust law. And the CFPB should explore potential remedies to exploding credit reporting costs, including a cap on fees that credit reporting agencies can charge and interoperability requirements that would allow consumers to move their credit scores without new fees. FHFA has already taken action to promote competition among the credit bureaus and increase accuracy in credit scoring by transitioning to a “bi-merge” system that requires two, instead of three, credit reports from the nationwide credit reporting agencies. But the Administration can and should do more to lower credit reporting costs for everyday Americans.”
The Community Home Lenders of America (CHLA) expressed similar concerns in a letter sent earlier this month to the Illinois Attorney General.
CHLA claimed that “FICO’s near total control over credit scoring has led to several adverse effects,” including an increased financial burden on consumers, restricted access to credit, stifled innovation, and “a heavy financial strain on small lenders and credit unions.”
“The increased operational costs borne by these institutions often result in a reduction in lending activities, furthering restricting access to credit for those who need it most,” the organization’s letter stated.
FICO has been a target of politicians and industry groups for some time. In March of this year, Sen. Josh Hawley (R-MO), sent a letter to the U.S. Department of Justice earlier this month requesting an investigation of FICO. Hawley wrote that FICO’s “recent actions” demand an investigation of potentially “anticompetitive practices.”
Also earlier this year,, the National Consumer Reporting Association (NCRA) expressed concern about a FICO price increase imposed in January 2023. At that time, FICO established three pricing tiers. The wholesale price increase was only 10 percent for the top tier of approximately 46 lenders. FICO increased its credit reporting price by 200 percent for six lenders in a middle tier. The remaining lenders were hit with a 400 percent price increase, according to NCRA.
This month’s calls for action come on the heels of analyst reports predicting that FICO would use its competitive advantage to raise prices on credit reports to drive increases in its financial performance and stock price.
HousingWire reported last week that stock analysts for both Wells Fargo and Jeffries wrote in reports that FICO could raise the cost of reporting from the current $3.50 per report to $5 or more. Doing so could boost FICO’s revenue by $180 million to $200 million in the next fiscal year.
The Federal Housing Finance Agency (FHFA) is in the midst of replacing the Classic FICO credit score with FICO 10T and VantageScore 4.0. The transition to the new models also includes changing the requirement for three credit reports to only two credit reports for single-family loan acquisitions by Fannie Mae and Freddie Mac. Both transitions are expected to occur in the fourth quarter of 2025.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
