(USA TODAY ) - A Texas company that provides auto loans to subprime borrowers was fined $2.75 million Wednesday for distorting customers' credit records for three years, potentially harming tens of thousands of consumers.
The federal Consumer Financial Protection Bureau imposed the fine against First Investors Financial Services Group after an investigation showed officials of the Houston-based firm knew their computer system was sending inaccurate information to credit reporting agencies, but took little action to correct the problem.
As a result, the company understated how much some clients paid on their auto loans, overstated the amounts past due, misreported dates when customers fell behind on payments and inflated the number of delinquent payments, investigators found.
The inaccurate data could make it tougher for the consumers to receive other loans, qualify for lower interest rates or land a job, said CFPB Director Richard Cordray.
"When First Investors knowingly sent the wrong information to the credit reporting agencies, it put consumers with credit profiles that were already impaired into an even more perilous position," he said in announcing the enforcement action — part of what agency officials said was the CFPB's continuing focus on credit-reporting violations.
First Investors said it has not admitted any wrongdoing, but agreed to a consent order with the CFPB "to avoid the expense and business disruption" a court fight would entail. The credit reporting issues affected between 1% and 12% of borrowers' accounts, the company said.
"When issues were identified, First Investors worked with its service provider to correct them," the company said. "All of the issues described in the consent order were reported by First Investors to the CFPB and were either corrected or in the process of being corrected when reported."
Along with the financial fine, the consent order requires First Investors to identify and correct all inaccurate credit information for customers, help the affected clients get free credit reports and update its procedures and policies to guard against any repetition of the problem.
The website of Houston-based First Investors says the company was founded in 1988 and provides indirect loans serving auto dealerships in 43 states, as well as direct loans to consumers. The firm's financing programs "generally target consumers with credit scores of 510 and greater, including a strong emphasis on consumers which have gone through a bankruptcy process," the website states.
A recent CFPB report shows that consumer complaints about credit reporting account for roughly 12% of the approximately 395,300 total complaints received since the agency began logging them in July 2011. Nearly three quarters of the credit reporting complaints alleged incorrect information on credit reports.