First Investors Financial Services Group Inc., an auto finance company, has been fined $2.75 million for sending inaccurate information to credit reporting agencies by the Consumer Financial Protection Bureau.
The company, which serves mostly subprime borrowers, failed to correct flaws in its computer reporting program which resulted in “distorted credit reports” for possibly “tens of thousands of customers,” the bureau said.
When First Investors became aware of the flaws in April 2011, the company notified the program vendor of the problem. But the company left the issue in the vendor’s hands, and did not take steps to replace the system or correct the inaccurate information it had supplied, the bureau said.
Ensuring that the problems were fixed, however, should have been First Investors’ responsibility, the CFPB said.
“Using a flawed computer system purchased from an outside vendor does not get you off the hook for meeting your own obligations,” said CFPB Director Richard Cordray in a press call. “Data furnishers … should make sure that any products or vendors they use to perform these duties are doing so accurately and legally. Some are doing this better than others, and some are not doing what they promise or what federal law requires.”
In a written statement, First Investors said that the problems listed in the consent order were either corrected or in the process of being corrected by the time they were reported.
“To resolve the matter and to avoid the expense and business disruption associated with defending any lawsuit, First Investors elected to settle the CFPB’s claims rather than dispute them in court. First Investors has not admitted any wrong doing,” the company said.
Among the inaccurate information were incorrect payments and overdue amounts, delinquency dates and the number of delinquencies; First Investors also mischaracterized whether a vehicle had been repossessed or voluntarily surrendered, the bureau said.
“First Investors showed careless disregard for its customers’ financial lives by knowingly distorting their credit profiles for years,” Cordray said. “Companies cannot pass the buck by blaming a computer system or vendor for their mistakes. Today’s action sends a signal that the CFPB will hold companies accountable for sending inaccurate information to credit reporting agencies.”