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CFPB: Lender distorted credit reports

By Jeanine Skowronski · Bankrate.com
Wednesday, August 20, 2014
Posted: 4 pm ET

The Consumer Financial Protection Bureau has an eye on credit reporting issues.

The agency took enforcement action against auto financer First Investors Financial Services Group Inc. Wednesday for distorting consumer credit records for years.

Per the CFPB, First Investors, which lends primarily to subprime borrowers, failed to fix known flaws in a computer system that was providing inaccurate information to credit reporting agencies.

Information allegedly reported as a result of the faulty program included wrong payments and overdue amounts, distorted dates of first delinquencies, mischaracterization of vehicle surrender and inflated delinquencies. The CFPB, for instance, cites one customer, who was reported delinquent 11 times when they had only been delinquent twice. It estimates tens of thousands of First Investors' customers were affected by the reporting errors, which violate the Fair Credit Reporting Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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Many of First Investors' subprime auto loan borrowers were negatively affected by credit reporting errors.

"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," CFPB director Richard Cordray said in a prepared statement.

The Texas-based First Investors has been ordered to pay a $2.75 million fine, fix its errors and change its business practices as part of the enforcement action. It must also help affected consumers obtain free copies of their credit reports so they can check their report's accuracy.

First Investors said in an emailed statement that all of the issues described in CFPB's consent order were reported by First Investors to the CFPB and were either corrected or in the process of being corrected when reported.

A CFPB crackdown regarding credit reporting issues, particularly those that affect subprime borrowers, could be forthcoming.

"Today's action sends a signal to all companies that supply information to the credit reporting agencies that they must have sound practices in place that protect consumers," Cordray said. "We will continue to monitor this market carefully, and we will not hesitate to take further enforcement actions as they are needed."

Follow me on Twitter: @JeanineSko.

 

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