WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has taken enforcement action against American Honda Finance Corporation for inaccurately reporting credit information that impacted the records of approximately 300,000 customers. The inaccuracies, which occurred during the COVID-19 pandemic, marred the credit reports of Honda and Acura vehicle owners, leading to financial and personal repercussions for affected borrowers.
The CFPB’s investigation revealed that Honda Finance improperly labeled customers as delinquent during a payment deferral program offered amid the pandemic. Despite assurances to borrowers that deferrals would not negatively affect their credit status, the company reported deferred payments as overdue. Such actions violated the Fair Credit Reporting Act and prompted the CFPB to fine the company $12.8 million, including $10.3 million for customer redress and a $2.5 million penalty.
Missteps During the Pandemic
At the height of the national emergency, Honda Finance introduced a payment deferral program designed to help borrowers facing financial hardships. Under this program, customers could temporarily postpone their payments without facing penalties. However, instead of reporting these participants as “current” to credit reporting agencies, as was promised, Honda Finance inaccurately flagged them as delinquent.
“The errors made by Honda Finance smeared the credit reports of hundreds of thousands of its customers,” said CFPB Director Rohit Chopra. “False accusations on a credit report can have serious implications for Americans seeking a job, housing, or a loan.”
The CFPB identified that Honda Finance continued submitting erroneous data even after uncovering problems in its reporting practices. These actions not only damaged consumers’ credit records but also exacerbated their financial struggles by potentially limiting access to other forms of credit.
Handling of Consumer Disputes
The enforcement investigation further revealed that Honda Finance fell short in addressing disputes related to incorrect credit reporting. When consumers disputed inaccuracies with their credit reports, the company failed to conduct thorough investigations and often neglected to inform credit reporting agencies or the consumers themselves of the outcomes. Such failures compounded the harm caused by its faulty credit furnishing practices.
Penalties and Corrective Actions
Under the CFPB order, Honda Finance will take the following corrective actions to resolve the violations of the Fair Credit Reporting Act and mitigate further harm to consumers:
- $10.3 Million Redress to Affected Consumers: Honda Finance is required to compensate harmed customers by paying $10.3 million in restitution. The company must also rectify prior credit reporting inaccuracies.
- $2.5 Million Civil Penalty: Honda Finance will contribute $2.5 million to the CFPB’s victims relief fund, which supports efforts to provide restitution to consumers harmed by violations of financial laws.
The CFPB emphasized that Honda must also revamp its credit reporting protocols and dispute investigation processes to ensure future compliance with federal standards.
Impact on Borrowers and the Industry
American Honda Finance Corporation, headquartered in Torrance, California, is a major automotive finance subsidiary of American Honda Motor Co., Inc. Its primary role is to support Honda and Acura dealerships by managing loans and leases for vehicle buyers. However, this enforcement action sheds light on broader challenges within the financial services sector. Missteps by companies such as Honda Finance underscore the need for heightened accountability when dealing with sensitive consumer credit data.
For affected borrowers, the ruling offers some relief through financial restitution and long-overdue corrections to inaccurate credit records. It also serves as a cautionary tale for other financial institutions, highlighting the CFPB’s commitment to enforcing compliance with consumer protection laws.
This case reaffirms that accurate credit reporting is not just a regulatory requirement but an essential responsibility for companies that handle consumer financing. For hundreds of thousands of consumers, it is also a critical factor in maintaining access to financial stability and trust in the system.
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