WASHINGTON—The CFBP has taken action against CarHop, one of the country’s biggest “buy-here, pay-here” auto dealers, and its affiliated financing company, Universal Acceptance Corporation, for providing damaging, inaccurate consumer information to credit reporting companies.
CarHop and its affiliate also failed to provide accurate, positive credit information that it promised consumers it would supply to the credit reporting companies, the Bureau stated. The CFPB’s investigation found that the companies inaccurately reported information for more than 84,000 accounts on a widespread and systemic basis. The CFPB is ordering the companies to cease their illegal activities and pay a $6,465,000 civil penalty.
“Many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills,” said CFPB Director Richard Cordray. “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.”
Buy-here, pay-here dealers sell cars and originate and service the auto loan. CarHop has approximately 50 retail locations in approximately 15 states. CarHop sells vehicles primarily to customers with nonexistent or poor credit histories in need of subprime or deep subprime credit, the CFPB explained.
“It markets itself as a way for these consumers to rebuild or build-up good credit by saying it will provide positive payment histories to the credit reporting companies. Consumers who buy from CarHop frequently do so because they suffer from poor credit scores and other financial challenges,” the CFPB said.
Universal Acceptance Corporation, on behalf of CarHop, furnishes consumer account information to all three major consumer reporting companies on a monthly basis. The CFPB found that the company reported information that it knew or had reasonable cause to believe was inaccurate. The company inaccurately furnished information for more than 84,000 accounts from about January 2009 until September 2013.
“With CarHop, consumers may not have even known about the damage to their credit profiles resulting from the erroneous reporting unless and until they checked their credit reports,” the Bureau said. “Almost all the information the companies inaccurately furnished to the credit reporting companies could potentially harm customers. The negative information could lower a consumer’s credit score, hamper their ability to obtain other credit, and hurt their job prospects.”
The CFPB found that CarHop and Universal Acceptance Corporation violated the Fair Credit Reporting Act and the Consumer Financial Protection Act.