The Bureau of Consumer Financial Protection (CFPB) took action against an automotive finance company for allegedly knowingly providing inaccurate information to credit reporting agencies about consumers for years, fining the Texas-based company $2.75 million.
According to the CFPB, First Investors Services Group, which offers both direct and indirect auto purchase financing focusing primarily on subprime borrowers, was aware of flaws in its computer system that distorted the credit records of consumers in violation of the Fair Credit Reporting Act (FCRA) by furnishing incorrect information to credit reporting agencies – and failed to fix the problems.
The misinformation included inaccurate reports about how much consumers were paying toward their debt, incorrect dates of first delinquency, inflating the number of delinquencies when reporting borrowers’ previous 24 months of activity, and statements that some consumers had their vehicles repossessed when they had actually been voluntarily surrendered.
Over a three-year period, First Investors provided inaccurate data on 118,855 accounts, the CFPB estimated, even after being made aware of the issue in April 2011. When the company learned of the problem, it simply notified its vendor but did not take any additional steps, such as replacing the system or correcting the inaccurate information, the Bureau said, and continued to use the flawed system for years.
In addition to the monetary penalty, the company agreed to conduct a review of its accounts, correct inaccuracies, and inform consumers about any errors while explaining their right to dispute information and obtain a free credit report. The CFPB also required First Investors to provide sufficient staffing, facilities, systems, and information for the company to timely and completely respond to consumer disputes to achieve compliance with the FCRA, as well as establish an audit program.
To read the consent order, click here.
Why it matters:“First Investors showed careless disregard for its customers’ financial lives by knowingly distorting their credit profiles for years,” CFPB director Richard Cordray said in a statement about the action. “Companies cannot pass the buck by blaming a computer system or vendor for their mistakes. Today’s action sends a signal that the CFPB will hold companies accountable for sending inaccurate information to credit reporting agencies.” Notably, the inaccurate reports were due to problems at the third-party vendor, not at the lender. The action therefore reminds companies that the CFPB is holding entities responsible for the acts of their outsource partners.