Blog: CFPB penalizes Hyundai Capital America $19M over credit reporting – Auto Remarketing

The largest monetary penalties handed out by the Consumer Financial Protection Bureau (CFPB) since Rohit Chopra became director in October surfaced publicly on Tuesday afternoon.

And those penalties surpassing $19 million relate to auto financing.

The CFPB penalized Hyundai Capital America for what the regulatory said was repeatedly providing inaccurate information to nationwide credit reporting companies and failing to take proper measures to address inaccurate information once it was identified between 2016 and 2020.

The CFPB explained through a news release that it found that Hyundai’s captive used manual and outdated systems, processes and procedures to furnish credit reporting information that led to widespread inaccuracies and resulted in negative inaccurate information being placed on consumers’ credit reports.

In total, the CFPB said it found that Hyundai Capital America furnished inaccurate information in more than 8.7 million instances on more than 2.2 million consumer accounts during that period.

Officials said their order requires the captive to take steps to prevent future violations and to pay more than $19 million, including $13.2 million in redress to affected consumers who were inaccurately reported as delinquent and a $6 million civil money penalty, making this development the CFPB’s largest Fair Credit Reporting Act case against an auto servicer.

“Hyundai illegally tarnished credit reports for millions of borrowers, including by falsely reporting them to credit reporting companies as being delinquent on their loans and leases,” Chopra said in the news release. “Loan servicers must be complete and accurate when furnishing information that affects a borrower’s credit report.”

Hyundai Capital America purchases and services retail installment contracts and vehicle leases originated by 1,600 Hyundai, Kia, and Genesis dealerships. The CFPB said the  captive currently services approximately 1.7 million customers through its retail installment contracts and leases and has more than $45 billion of reported assets as of 2021.

Hyundai Capital America sent this statement to Cherokee Media Group on Tuesday afternoon.

“The Consumer Financial Protection Bureau (CFPB) initiated a review of Hyundai Capital America’s (HCA) credit reporting practices for its consumer retail and lease accounts, which was part of a larger credit reporting review by the CFPB across the industry,” the captive said. “To support our customers and allow us to focus on the future, we have entered into a settlement agreement with the CFPB.

“It is important to note that HCA is not admitting any fault or wrongdoing with respect to credit reporting practices covered by the investigation,” the captive continued. “As part of HCA’s efforts to drive continuous improvement, we have already launched an end-to-end review of our current credit reporting practices. Most importantly, we remain fully committed to providing our customers with timely, accurate, high-quality service and care.”

What went wrong

The CFPB said it received “many” consumer complaints that Hyundai inaccurately reported account information to credit reporting companies. During its investigation, the CFPB said it found that Hyundai repeatedly provided inaccurate credit report information about consumer payments on installment contracts and leases that Hyundai purchased and serviced.

“In many cases, Hyundai knew it was providing inaccurate information and failed to take reasonable measures to address the inaccuracies,” the CFPB said. “Hyundai identified many of the issues causing these inaccuracies in its internal audits, but still took years to address the problems.”

Between January 2016 and March 2020, the CFPB said it also found the captive violated the Fair Credit Reporting Act (FCRA) and its implementing regulation, Regulation V, by:

—Failing to report complete and accurate contract and lease account information: The bureau said the captive repeatedly did not take steps to promptly update and correct information it furnished to credit reporting companies that it determined was not complete or accurate, and continued to furnish this inaccurate and incomplete information.

—Failing to provide date of first delinquency information when required: The CFPB reiterated the FCRA requires data furnishers to provide credit reporting companies the date of delinquency for when a delinquent account is being charged off or placed for collections. The bureau said the captive failed to report a date of delinquency for many consumers who were more than 90 days delinquent.

—Failing to modify or delete information when required: The CFPB said the captive’s furnishing system often overrode manual corrections made by employees in responding to consumer disputes. The furnishing system would provide monthly updates to credit reporting companies that reintroduced the data error after it had been disputed and corrected, according to the regulator.

—Failing to have reasonable identity theft procedures: The bureau also mentioned FCRA requires furnishers to respond to any notifications from credit reporting companies about furnished information that is the result of identity theft. The CFPB said the captive failed to establish reasonable identity theft and related blocking procedures to respond to identity theft notifications and continued to report such information that should have been blocked on a consumer’s report.

—Failing to have reasonable accuracy and integrity policies and procedures: The CFPB explained Regulation V requires furnishers to maintain written policies and procedures regarding the accuracy and integrity of the information furnished. The bureau said the captive failed to review and update its credit reporting furnishing policies and procedures from 2010 to 2017. It was not until 2021 that the company finally updated some of its credit reporting policies and procedures, according to officials.

More details of enforcement action

The CFPB specified the four components of its penalties against Hyundai Capital America, including

—Pay $13.2 million in compensation to current and former customers: As identified by the CFPB, consumers about whom the captive, after determining the information was inaccurate, furnished to credit reporting companies inaccurate information that the consumers were 30 or more days past due on an automobile retail installment contract or lease will receive compensation for the harm incurred.

—Pay a $6 million fine: The captive will pay a civil money penalty to the CFPB, which will be paid towards the victims relief fund. This fund provides compensation to consumers harmed by violations of federal consumer financial protection law.

—Take steps to correct all inaccurate account information: The bureau said the captive will review all account files that it currently furnishes to credit reporting companies and correct all inaccuracies and errors described in the order and send updated information to the credit reporting companies.

Hyundai Capital America will also examine its monthly furnishing data processes for the errors described in the order, take reasonable steps to identify such errors, and resolve identified errors before providing the data to any credit reporting company.

—Address procedures identifying and correcting inaccurate information: The CFPB said Hyundai Capital America will establish and implement written policies and procedures regarding the accuracy and integrity of the information relating to consumers that it furnishes to a credit reporting company. The captive must specifically include processes for identifying and promptly correcting systemic errors in its credit report furnishing system.

Hyundai Capital America will also examine current policies and procedures and implement changes to the practices of its employees to ensure that its employees properly route, categorize, investigate, and respond to all direct and indirect credit reporting disputes.

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