“Buy here, pay here” car dealer DriveTime has been ordered to pay an $8 million civil penalty by the Consumer Financial Protection Bureau, or CFPB, after it allegedly made what the agency called “harassing debt collection calls” and provided inaccurate credit information to credit reporting agencies. The agency also ordered the company to take corrective actions, including free credit reports for the impacted consumers.
Arizona-based DriveTime Automotive Group, Inc. and its finance company, DT Acceptance Corporation, are the nation’s largest buy-here, pay-here car dealer. The company operates 117 dealerships in 20 states and, as of Dec 31, 2013, held more than 150,000 outstanding auto installment contracts.
DriveTime consented to the issuance of the Consent Order by CFPB under Sections 1053 and 1055 of the CFPA, 12 U.S.C. §§ 5563 and 5565, “without admitting or denying any of the findings of fact or conclusions of law, except that DriveTime admits the facts necessary to establish the Bureau’s jurisdiction over DriveTime and the subject matter of this action.”
DriveTime executive vice president and general counsel Jon Ehlinger said in an emailed statement that the company strives to comply with all applicable laws.
“Over the last several years, prior to the initiation of the CFPB investigation, DriveTime had taken and has continues to take steps to enhance its customer experience, and loan servicing activities, including the handling of do not call requests and credit reporting, Ehlinger said in the statement.
“We look forward to an ongoing relationship with the agency, and hope to establish a constructive dialogue designed to improve our customer service and compliance practices in the years ahead,” he said.
Typically, buy-here, pay-here dealers service subprime borrowers. DriveTime’s average customer has an annual income of $37,000 to $50,000 and a FICO score between 461 and 554 according to CFPB. The regulator said that at least 45% of DriveTime’s auto installment contracts were delinquent at any given moment.
The consent order says that In November 2011, DriveTime started using a third-party loan servicing platform to compile information to be furnished. By April 2013, DriveTime outsourced its furnishing completely. The conversion to a third-party servicing platform was a massive transition that led to inaccuracies in DriveTime’s furnished information.
Following the November 2011 conversion, DriveTime furnished duplicate account information for at least 20,000 accounts. DriveTime did not detect these furnishing inaccuracies until April 2012, and it corrected the inaccuracies in June 2012 according to CFPB.
Then, in 2012, CFPB alleges that DriveTime furnished inaccurate current balances for consumers on 90,000 charged-off accounts, largely due to problems with that conversion. DriveTime did not detect these furnishing inaccuracies until July 2012, and it suspended furnishing until the cause of the inaccuracy was corrected in October 2012 CFPB says.
Among the other violations alleged by CFPB was that DriveTime management encouraged collectors to call borrowers at work and call references despite requests that the collectors stop. Collector also allegedly called wrong numbers, some for as long as a year.
In some cases, DriveTime allegedly gave credit reporting agencies information that inaccurately reflected the timing of repossessions and dates of a first delinquency. The company also is alleged to have improperly handled credit information furnishing disputes. Drive Time allegedly failed to implement reasonable procedures to ensure the accuracy of consumers’ credit information.