Credit Reporting Practices Prompt $6.4M CFPB Fine

A car dealer and its financing arm will pay a $6.4 million fine to the Consumer Financial Protection Bureau for allegedly providing inaccurate information to credit reporting firms.

The CFPB alleged CarHop and its affiliated financing company, Universal Acceptance Corp., failed to provide accurate, positive credit information that it promised consumers it would supply to credit reporting companies. A CFPB investigation found the companies inaccurately reported information for more than 84,000 accounts on a "widespread and systemic basis,” the CFPB reported.

CarHop emphasized in written communications to consumers that it reports "good credit" to the credit reporting companies, according to the CFPB. 

"This appealed to consumers trying to build up their credit profiles with a history of on-time payments. But the company, through Universal Acceptance Corp., failed to furnish certain positive information, including information that would support 'good credit,' for tens of thousands of consumers,” according to the CFPB.

In another credit reporting case this month, the CFPB announced a settlement with nationwide credit reporting company, Clarity Services Inc., for allegedly illegally obtaining consumer credit reports. The firm was ordered to pay an $8 million fine.

In August 2014, the CFPB fined Texas-based subprime auto lender First Investors Financial Services Group approximately $2.8 million for reporting inaccurate customer credit information to the credit bureaus.

In the latest action, the CFPB found that CarHop and Universal Acceptance violated the Fair Credit Reporting Act. 

"Many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills," CFPB Director Richard Cordray said in a news release. "But CarHop and Universal Acceptance Corp. thwarted those expectations by inaccurately furnishing negative credit information. The CFPB will not stand for companies whose sloppy actions jeopardize consumers' credit."The companies also were alleged to have provided inaccurate repossession information, incorrectly reported previous customers as still owing money and failed to have reasonable written policies and procedures to ensure the accuracy of consumers’ credit information.

The companies settled without admitting or denying any of the findings of fact or conclusions of law. CarHop is headquartered in Minnesota, with about 50 retail locations in 15 states. Universal Acceptance, on behalf of CarHop, furnishes consumer account information to the three major consumer reporting companies monthly.

"We have agreed to this settlement, under which we have not admitted to the CFPB's allegations, to move beyond the distraction of the investigation started in May of 2012," CarHop said in a statement posted on its website. "Although the CFPB has made a number of allegations, it did not find that any consumer is entitled to any damages.

"CarHop/UAC strives to comply with all applicable laws and regulations and provide exemplary service to our customers," the company said. "Over the last several years and prior to the initiation of the CFPB investigation, we had taken and have continued to take steps to positively enhance our customers’ experience. We look forward to an ongoing relationship with the CFPB and hope to continue our constructive dialogue to improve our customer service and compliance practices in the years ahead."