CFPB’s Supervisory Highlights Cite Auto Loan Furnishers for Allegedly Deficient Credit Reporting Practices

The Consumer Financial Protection Bureau recently released the Spring 2024 edition of its Supervisory Highlights. This edition focuses on alleged violations of credit reporting requirements, both by consumer reporting companies and by furnishers. The Highlights detail what the CFPB alleges to be several trends of violations of the Fair Credit Reporting Act and Regulation V by “auto loan furnishers,” a term that the CFPB uses but that apparently includes both direct auto lenders and assignees of dealer-originated motor vehicle retail installment contracts.

The CFPB reports that multiple auto loan furnishers have failed to update furnished information after determining that the information is inaccurate or incomplete.
According to the CFPB, failures to update furnished information are especially prevalent where a consumer enters bankruptcy. In such a case, the furnisher must update the date of first delinquency, and the CFPB alleges that some auto loan furnishers routinely fail to do so. The Highlights also state that assignees of lease contracts often update their internal records to reflect full payment of a lease but do not report the paid-in-full status to consumer reporting companies.

The CFPB also identifies deficiencies in auto loan furnishers’ procedures for investigating direct disputes by consumers. According to the Highlights, auto loan furnishers may impose identity verification requirements beyond what Reg. V specifies for a direct dispute. As a result, a consumer may fail to meet the furnisher’s identity verification requirements even though they meet the requirements under the regulation. Reg. V does not allow a furnisher to impose identity verification requirements for direct disputes beyond what the regulation specifies. The CFPB also reminds auto loan furnishers that deleting a tradeline in response to a direct dispute does not satisfy the furnisher’s duty to investigate the dispute.

The Highlights cite auto loan furnishers for failing to act appropriately when a consumer submits an identity theft report at an address that a furnisher specifies. When a furnisher receives an identity theft report at the correct address, the furnisher must not report information that may have resulted from the identity theft until the furnisher verifies the information or the consumer informs the furnisher that the information is
accurate. The CFPB reports that some auto loan furnishers have continued to report information allegedly resulting from identity theft before verifying or being told by consumers that the information is correct.

The above is not a complete list of common credit reporting deficiencies that the CFPB identifies in the Supervisory Highlights. The CFPB also states that auto loan furnishers often fail to report direct disputes to consumer reporting companies and identify dates of first delinquency incorrectly. Additionally, the Highlights summarize a recent enforcement action against a major auto finance company. In the resulting consent decree, the CFPB alleged several violations of the FCRA and other laws. The alleged FCRA violations largely involved leases, where the company allegedly reported accounts as delinquent even though lessees had made all payments and returned vehicles as scheduled. We reported on that enforcement action in the December 2023 issue of Spot Delivery.

Many of the problems that the CFPB cites in its Supervisory Highlights have a common thread: they involve failures to update information that a furnisher has reported. It isn’t enough that you report information that appears to be correct when you report it. You need to correct, update, or stop reporting the information if you later learn that it may be wrong. For example, if a consumer enters bankruptcy, the date of first delinquency changes. If a consumer submits a report of identity theft, you need to stop reporting the allegedly fraudulent information until you know it’s accurate. If a consumer disputes information, you need to flag the information as disputed until the dispute is resolved.

In short, you can’t just report information and then forget about it; the information needs to be accurate both when you first report it and afterwards.