Subprime Auto Lender Fined $2.75M For Providing Inaccurate Information To Credit Agencies

Even the slightest bad rating on a credit report can have long-lasting negative affects on consumers’ lives – from getting jobs to renting or buying a home. And while most bad credit behavior detailed on credit reports are of the consumers’ own doing, sometimes it’s the result of inaccurately furnished information from financial institutions. That appears to be the case for a Houston-based financial group that now faces a hefty fine from the Consumer Financial Protection Bureau.

The CFPB announced today that it fined subprime lender First Investors Financial Services Group Inc. $2.75 million for knowingly providing inaccurate consumer information, including wrong payment and overdue amounts, distorted dates, inflated delinquencies and mischaracterization of vehicle surrender, to credit reporting agencies.

According to a CFPB consent order [PDF], First Investors continued to provide inaccurate information to credit reporting agencies even after discovering the issue in April 2011.

When the company, which specialized in lending to consumers with impaired credit profiles, notified the vendor of issues, but failed to take steps to correct the situation.

“It continued for years to use a system that it knew was flawed. Tens of thousands of consumers were likely subject to these systemic reporting problems,” the CFPB alleges.

According to CFPB investigators the inaccurate information provided by First Investors included:

• Wrong payments and overdue amounts: First Investors provided inaccurate information about how much consumers were paying toward their debts. In many cases, First Investors understated the amounts its customers were paying. When consumers made multiple payments within a single month, for example, First Investors only reported one of the payments. This does not give consumers full credit for keeping up with their loan obligations. First Investors also overstated the dollar amount by which many of its customers were past due on their accounts.

• Distorted dates: First Investors inaccurately reported many of its customers’ “date of first delinquency,” which is the date on which a consumer first became late in paying back the loan. In most cases, First Investors was reporting the date to be more recent than it actually was. The date an account first becomes delinquent matters because it determines how long a delinquency can appear on a consumer’s credit report. Inaccurate reporting of the age of a consumer’s delinquency can cause it to appear on the consumer’s credit report longer than is allowed by the FCRA.

• Inflated delinquencies: First Investors substantially inflated the number of delinquencies for some customers when it reported customers’ last 24 months of consecutive payment activity. In one case, First Investors reported that a consumer was delinquent eleven times, when in fact the consumer had only been delinquent twice.

• Mischaracterization of vehicle surrender: When loans reach a certain stage of delinquency, First Investors has the option to repossess the car. Before that happens, though, consumers have the option to voluntarily surrender their vehicle and avoid a “repossession” showing up on their credit report. First Investors told credit reporting agencies that some of its customers had their vehicles repossessed, when in fact those individuals had voluntarily surrendered their vehicles back to the lienholder.

In addition to paying the $2.75 million fine, First Investors must correct the errors on consumers’ credit reports, help consumers obtain free copies of their credit reports and establish consumer safeguards.

Consumer Financial Protection Bureau Takes Action Against Auto Finance Company For Distorting Borrower Credit Reports [CFPB]

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