CFPB Hits First Investors with $2.75 Million Fine

The Consumer Financial Protection Bureau said today that it is leveling a $2.75 million fine against Texas-based First Investors Financial Services Group for failing to fix known flaws in its computer system that caused the system to provide inaccurate information to credit reporting agencies.

CFPB said the company had violated the Furnishers Rule and ended up distorting many of its consumer’s credit records for years.

During a press call, senior agency officials said to expect continued efforts that support the accuracy and integrity of the credit reporting system.  They said finance companies can’t pass the buck to the vendor when errors appear in the CRA system.  The furnisher is ultimately responsible for the information they furnish.

Meanwhile, First Investors said in a statement today it has not admitted any wrongdoing. “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,” the company said in a statement.

But CFPB officials said when First Investors discovered the problem with its computer system in April 2011, it notified the vendor but did nothing more.  The company did not replace the system or take any steps to correct the inaccurate information it had supplied to CRAs.  Instead, it simply continued for years to use a system that it knew was flawed, CFPB says.

In a statement, CFPB director Richard Cordray wrote that there were several kinds of inaccuracies reported to the CRA’s by First Investors.  The company frequently understated how much consumers were paying toward their debt.  It overstated the amount past due.  It misreported the dates when consumers became delinquent.  And it inflated the number of delinquent payments.  In one case, it reported that a consumer was delinquent 11 times when in fact that consumer had only been delinquent twice.

CFPB said First Investors also mischaracterized vehicle surrenders.  It told credit reporting agencies that some of its customers had their vehicles repossessed when, in fact, those individuals had voluntarily surrendered their cars.

“First Investors showed careless disregard for its customers’ financial lives by knowingly distorting their credit profiles for years,” said CFPB Director Richard Cordray. “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.”

But First Investors said in its statement that when the issues were identified, the company worked with the service provider to correct them. The company said all of the issues described in the CFPB Consent Order were reported by First Investors to the CFPB and were either corrected or in the process of being corrected when it reported them.

First Investors said CFPB’s Consent Order acknowledges that the company timely responded to any consumer dispute and corrected the furnished information when necessary. The Consent Order also makes clear that the furnishing issues identified affected between 1% and 12% of First Investors accounts according to the company statement.

During the press call today, senior CFPB officials said it will continue to monitor and take similar actions regarding violations of the credit reporting systems in place.

A senior official said “you should look forward to continued efforts at CFPB to support accuracy, integrity in credit reporting system.”

Auto Finance News will have updates as they become available.