The Consumer Financial Protection Bureau has taken action against CarHop, one of the country's biggest "buy-here, pay-here" auto dealers, and its affiliated financing company, Universal Acceptance Corporation, for providing "damaging, inaccurate consumer information to credit reporting companies." The CFPB found that CarHop and Universal Acceptance Corporation violated the Fair Credit Reporting Act and the Consumer Financial Protection Act in the following ways:
- Provided inaccurate repossession information: CarHop customers had the right to voluntarily return their vehicles within 72 hours of purchase for a full refund without any penalties or additional obligations. However, for some customers who returned their vehicles under this policy, Universal Acceptance Corporation did not accurately report to the credit reporting companies what really happened. Instead, the company inaccurately reported on numerous occasions that the cars had been repossessed or that the consumer still owed money.
- Incorrectly reported previous customers as still owing money: For consumers 72 hours past purchase, CarHop often resolved disputes by having the customer return the vehicle. It then issued documentation to the customer saying they no longer had any financial obligations and had settled their account. But for hundreds of customers, in the months or even years that followed after they returned their vehicles, Universal Acceptance Corporation inaccurately furnished, on a monthly basis, information that said that the customer still had an outstanding balance. Sometimes, the company inaccurately reported the amount past due in continuously increasing amounts.
- Failed to have reasonable written policies and procedures to ensure the accuracy of consumers' credit information: Universal Acceptance Corporation had no written policies and procedures regarding the accuracy and integrity of the consumer information it furnished until early August 2013. The policies it adopted that month were not reasonable or appropriate to the nature, size, complexity, and scope of the company's activities.
Pursuant to the Dodd-Frank Act, the CFPB began an enforcement action that was resolved via consent orders. Under the terms of the CFPB orders released today, CarHop and Universal Acceptance Corporation must:
- Correct credit reporting information: If Universal Acceptance Corporation furnished information to a credit reporting company that it knew or had reasonable cause to believe was inaccurate, it must notify the credit reporting company of the inaccuracy. When it does so, it must either provide corrected information or request that the company delete the wrong information from the consumer's file if accurate information is not available.
- Provide credit reports to harmed consumers: CarHop and Universal Acceptance Corporation must, for consumers who had incorrect information furnished about their accounts, arrange for consumers to obtain free credit reports from the credit reporting companies that received the inaccurate information.
- Implement an audit program to ensure laws are followed: CarHop and Universal Acceptance Corporation must implement a process for auditing information that Universal Acceptance Corporation furnishes to the credit reporting companies on a monthly basis. This process must include monitoring and evaluating the disputes the companies receive. The audit is designed to ensure the integrity and accuracy of the information.
- Pay a $6,465,000 civil penalty: CarHop and Universal Acceptance Corporation will pay a $6,465,000 penalty to the CFPB's Civil Penalty Fund.
Copies of the consent order can be found here. Troutman Sanders regularly counsels companies, including furnishers, on FCRA compliance obligations and risks. We will continue to monitor the activities of the FCPB with respect to credit reporting issues.
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