In the run-up to the end of the Biden Administration last week, the Consumer Financial Protection Bureau announced an enforcement action with American Honda Finance Corp. that will see the auto finance giant pay $12.8 million in penalties and consumer redress for inaccurately reporting information to credit reporting agencies, impacting 300,000 consumers.
Driving the news: Honda Finance, the financing arm of American Honda Motor Co., inaccurately reported deferred borrowers as delinquent during the COVID-19 pandemic. The CFPB found that Honda Finance:
- Reported deferred borrowers as delinquent instead of current, contrary to commitments made under the CARES Act.
- Continued to report inaccurate data even after identifying errors.
- Failed to properly investigate consumer disputes related to credit reporting.
- Lacked adequate policies and procedures to ensure the accuracy and integrity of furnished data.
The details: According to the CFPB consent order, Honda Finance violated the Fair Credit Reporting Act, Regulation V (the Furnisher Rule), and the Consumer Financial Protection Act (CFPA). Specific findings include:
- Deferral Misreporting: Honda Finance offered deferred payment programs during the pandemic but inaccurately reported affected accounts as delinquent, leading to potential harm such as lower credit scores and unfavorable loan terms.
- Failure to Correct Errors: Despite recognizing inaccuracies, Honda Finance continued furnishing incorrect information without timely updates.
- Dispute Handling Failures: The company did not conduct reasonable investigations into consumer disputes and failed to provide timely responses to credit bureaus and consumers.
- Policy Shortcomings: Honda Finance did not implement adequate written policies and procedures to ensure compliance with reporting accuracy requirements.
Enforcement action:
Under the CFPB order, Honda Finance must:
- Pay $10.3 million in restitution to affected consumers.
- Pay a $2.5 million civil penalty to the CFPB’s victim relief fund.
- Implement corrective measures, including enhanced policies and regular audits to prevent future errors.
