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From Banking and Finance Law Daily, December 17, 2015

‘Buy-here, pay-here’ auto dealer must pay-now $6.5M to CFPB

By J. Preston Carter, J.D., LL.M.

CarHop, one of the country’s biggest “buy-here, pay-here’ auto dealers, has entered into a consent order with the Consumer Financial Protection Bureau to settle claims that it violated the Fair Credit Reporting Act and the Dodd-Frank Act prohibition against unfair and deceptive acts or practices. CarHop and its affiliated financing company, Universal Acceptance Corporation, agreed to pay a $6,465,000 civil penalty to resolve the CFPB’s allegations that they inaccurately reported consumer information to credit reporting companies for more than 84,000 accounts on a widespread and systemic basis.

Minnesota-based CarHop, also known as Interstate Auto Group, has approximately 50 retail locations in approximately 15 states, according to the CFPB’s news release. CarHop sells vehicles primarily to customers with nonexistent or poor credit histories in need of subprime or deep subprime credit. It markets itself as a way for these consumers to rebuild or build up good credit by saying it will provide positive payment histories to the credit reporting companies. Consumers who buy from CarHop frequently do so because they suffer from poor credit scores and other financial challenges.

Universal Acceptance Corporation furnishes consumer account information to all three major consumer reporting companies on a monthly basis. The CFPB found that the company reported information that it knew or had reasonable cause to believe was inaccurate. Consumers dealing with CarHop may not have even known about the damage to their credit profiles resulting from the erroneous reporting unless and until they checked their credit reports, the bureau added.

Findings. The CFPB found that CarHop and Universal Acceptance Corporation violated the Fair Credit Reporting Act and the Consumer Financial Protection Act by:

  • deceiving consumers into believing they could build up good credit with CarHop;
  • providing inaccurate repossession information;
  • incorrectly reporting previous customers as still owing money; and
  • failing to have reasonable written policies and procedures to ensure the accuracy of consumers’ credit information.

Order. The consent order requires CarHop and Universal Acceptance Corporation to: cease misrepresenting that they will report “good credit”; correct credit reporting information; provide credit reports to harmed consumers; implement an audit program to ensure laws are followed; and pay a $6,465,000 civil penalty.

Companies: CarHop; Interstate Auto Group; Universal Acceptance Corporation

MainStory: TopStory CFPB ConsumerCredit EnforcementActions FairCreditReporting UDAAP

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