WASHINGTON Aug 20 The U.S. consumer financial
watchdog on Wednesday said it fined a subprime auto lender $2.75
million for providing inaccurate information about its customers
to credit reporting agencies.
Texas-based First Investors Financial Services Group did not
fix flaws in a computer system that caused it to overstate the
number of times borrowers fell behind on payments and inflate
overdue amounts, the Consumer Financial Protection Bureau said.
Experian, Equifax and other reporting
agencies use that information to generate reports on borrowers'
credit histories. The reports help determine whether consumers
are eligible for loans and can factor into employment decisions.
First Investors, which lends to borrowers with impaired
credit profiles both directly and through auto dealers, found
the problem in 2011 and notified the vendor that provided the
computer system, but did nothing else, the consumer bureau said.
Its actions violated federal law and may have hurt tens of
thousands of borrowers, the CFPB said.
"First Investors showed careless disregard for its
customers' financial lives by knowingly distorting their credit
profiles for years," said bureau Director Richard Cordray.
First Investors neither admitted nor denied wrongdoing and
said between 1 percent and 12 percent of its accounts were
affected. "When issues were identified, First Investors worked
with its service provider to correct them," the lender said in a
The CFPB was created by the 2010 Dodd-Frank law and charged
with overseeing consumer financial products, such as mortgages
and credit cards. It began overseeing big credit reporting
agencies in 2012.
Bureau officials are concerned about how credit reporting
mistakes hurt subprime borrowers, who are already subject to
predatory lending and higher interest rates. Moody's Investors
Service has said subprime auto lenders are behaving cautiously
and have raised rates.
First Investors did not replace the computer system that was
causing it to provide incorrect information or take any steps to
correct the data after it was submitted, the bureau said.
In addition to the fine, the lender must find and fix all of
the errors and help consumers get free copies of their credit
reports so that they can check for mistakes, the CFPB said.
Consumers are entitled to a free credit report once each year.
A senior CFPB official on Wednesday said the bureau would
continue to watch companies that furnish credit information to
reporting agencies and that more enforcement actions could
(Reporting by Emily Stephenson; Editing by Bernard Orr)