The Consumer Financial Protection Bureau has fined Texas subprime auto lender First Investors Financial Services Group Inc. $2.75 million for knowingly giving inaccurate information to credit bureaus for at least three years. This potentially harmed the credit scores of tens of thousands of consumers.
According to the CFPB, the company failed to fix known flaws in its computer system that gave inaccurate information about borrowers to credit reporting agencies.
“Companies cannot pass the buck by blaming a computer system or vendor for their mistakes,” said CFPB Director Richard Cordray. “Today’s action sends a signal that the CFPB will hold companies accountable for sending inaccurate information to credit reporting agencies.”
The fine was imposed after an investigation showed that the Houston-based company knew their system was sending incorrect information to credit agencies. The company understated how much some customers paid on their auto loan, overstated past due amounts, misreported dates when customers fell behind on payments and inflated the number of delinquent payments. First Investors also allegedly mischaracterized vehicle surrenders, reporting to credit bureaus that some companies had repossessed vehicles that were actually voluntarily surrendered by customers.
The investigation found that First Investors discovered the problem in April 2011 but did nothing aside from notifying its vendor. The company did not replace the system or take any action to correct the inaccurate information but continued using the flawed system for at least three years.
According to the CFPB, the incorrect data could make it harder for consumers to receive a new loan, qualify for lower interest rates or even get a job.
Along with the fine, First Investors has agreed to a consent order with the CFPB that requires the company to identify and correct inaccurate credit information for its customers, assist affected clients with obtaining free credit reports, and update its procedures to keep the problem from happening again.
According to First Investors, between 1% and 12% of First Investors accounts were affected.