CFPB Settles With Auto Dealer for $6.4 Million Over Credit Reporting

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By Jeff Bater

Dec. 17 — A car dealer and its financing arm agreed to pay a $6.4 million fine to the Consumer Financial Protection Bureau (CFPB) for allegedly providing inaccurate information to credit reporting companies.

The CFPB announced an enforcement action against CarHop and its affiliated financing company, Universal Acceptance Corporation.

The bureau alleged CarHop and its affiliate failed to provide accurate, positive credit information that it promised consumers it would supply to credit reporting companies. A CFPB investigation found the companies inaccurately reported information for more than 84,000 accounts on “a widespread and systemic basis,” the agency said Dec. 17.

“Many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills,” CFPB Director Richard Cordray said in a news release. “But CarHop and Universal Acceptance Corporation thwarted those expectations by inaccurately furnishing negative credit information. The CFPB will not stand for companies whose sloppy actions jeopardize consumers’ credit.”

Fair Credit Reporting Law

The CFPB found that CarHop and Universal Acceptance violated the Fair Credit Reporting Act. The bureau alleged the companies deceived consumers into believing they could build up good credit with CarHop.

As part of its marketing and sales practices, CarHop represented in writing to consumers that it reports “good credit” to the credit reporting companies, according to the CFPB. “CarHop also emphasized to consumers its part in helping them build and maintain good credit,” the bureau said in its news release. “This appealed to consumers trying to build up their credit profiles with a history of on-time payments. But the company, through Universal Acceptance Corporation, failed to furnish certain positive information, including information that would support ‘good credit,' for tens of thousands of consumers.”

The companies were also alleged to have provided inaccurate repossession information, incorrectly reported previous customers as still owing money, and failed to have reasonable written policies and procedures to ensure the accuracy of consumers’ credit information.

CarHop's Response

The companies settled without admitting or denying any of the findings of fact or conclusions of law. CarHop is headquartered in Minnesota, with about 50 retail locations in 15 states. Universal Acceptance, on behalf of CarHop, furnishes consumer account information to the three major consumer reporting companies monthly.

“We have agreed to this settlement, under which we have not admitted to the CFPB's allegations, to move beyond the distraction of the investigation started in May of 2012,” CarHop said in a statement posted on its website. “Although the CFPB has made a number of allegations, it did not find that any consumer is entitled to any damages.

“CarHop/UAC strives to comply with all applicable laws and regulations and provide exemplary service to our customers,” the company said. “Over the last several years and prior to the initiation of the CFPB investigation, we had taken and have continued to take steps to positively enhance our customers’ experience. We look forward to an ongoing relationship with the CFPB and hope to continue our constructive dialogue to improve our customer service and compliance practices in the years ahead.”

Credit Reporting Forays

Credit reporting is an area the CFPB has addressed in the past.

For instance, the bureau announced a settlement earlier in December with a credit reporting company accused of mishandling consumer information, ordering the firm to improve the way it investigates disputes and to pay an $8 million fine (233 BBD, 12/4/15).

In 2014, the CFPB accused an auto finance company of distorting borrowers' credit reports and said it must pay a $2.75 million fine and fix any inaccuracies (162 BBD, 8/21/14).

In its latest regulatory agenda, the CFPB signaled that, in the future, there was the potential for a rulemaking to address important issues related to credit reporting (225 BBD, 11/23/15).

To contact the reporter on this story: Jeff Bater in Washington at

To contact the editor responsible for this story: Seth Stern at

For More Information 
The CFPB news release and consent order can be found at