CFPB Cracks Down On Auto Lender’s Credit Scheme

The Consumer Financial Protection Bureau said that it is “taking action” against CarHop, which is billed as one of the country’s “buy here and pay here” auto dealers, and a financing company affiliated with that outfit for providing “damaging, inaccurate consumer information to credit reporting companies.”

[bctt tweet=”The Consumer Financial Protection Bureau said that it is “taking action” against CarHop.”]

The affiliate named by the CFPB is Universal Acceptance Corp.

In the press release issued Thursday (Dec. 17) by the bureau, the car dealer allegedly did not offer to agencies the accurate information that it had promised consumers would, in fact, be reported. The inaccuracies stretched across thousands of accounts — numbering 84,000, said the bureau — and as a result, the CFPB has ordered both of those companies to stop the activities and pay a civil penalty of more than $6.4 million.

In a statement accompanying the order of payment, CFPB Director Richard Cordray said that “many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills. 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.”

Under the terms of the CarHop business model, the loans under the “buy here and pay here” offer are originated at 50 locations across 15 states. The typical customer is one with poor or no credit. And the relationship is billed as one where the company will report timely payments and help consumers build up credit histories. Yet, Universal Acceptance furnished damaging and inaccurate info to the three credit agencies. In some cases, said the agency, when customers legitimately returned vehicles during the 72-hour grace period, CarHop claimed the cars had not been returned properly or had even been repossessed. Or, alternatively, the companies said that consumers still had outstanding balances when, in fact, they did not.