WASHINGTON (8/21/14)--An auto finance company has been accused of providing inaccurate information to credit reporting agencies, which the Consumer Financial Protection Bureau (CFPB) believes has caused distorted credit records.
On Wednesday, the CFPB announced a $2.75 million fine against Texas-based First Investors Financial Service Group, which the bureau alleges passed along information that could have potentially harmed tens of thousands of consumers.
"Consumers are harmed when companies furnish inaccurate information to credit reporting agencies. Incorrect reports on file at credit reporting agencies--such as Experian, TransUnion and Equifax--distort the true picture of how consumers have performed on their loans," said CFPB Director Richard Cordray. "An error could make a big difference in whether someone receives a loan, qualifies for a low interest rate, or even gets offered a job. It has the potential to disqualify people for rental housing or raise their premiums for auto insurance."
A CFPB investigation found that for three years First Investors used a flawed computer system that provided incorrect information to credit reporting agencies. When the company discovered this problem, in April 2011, it notified the vendor that provided the system, but it did not replace the system or take steps to correct the inaccurate information. In fact, First Investors continued to use the flawed program.
According to the CFPB, the company frequently understated how much consumers were paying toward their debt, overstated past due amounts, misreported delinquency dates and inflated the number of delinquent payments.
"In one case, it reported that a consumer was delinquent 11 times when in fact that consumer had only been delinquent twice," Cordray said, adding that many customers of First Investors were subprime borrowers to begin with, a population the company strategically targeted. "When First Investors knowingly sent the wrong information to the credit reporting agencies, it put consumers with credit profiles that were already impaired into an even more perilous position."
The CFPB has ordered First Investors to pay a $2.75 million fine, as well as identify and fix the affected consumer credit profiles, which includes giving free copies of credit reports to affected consumers. First Investors is also required to establish consumer safeguards.