The Consumer Financial Protection Bureau (CFPB) has imposed a significant financial penalty on American Honda Finance Corporation for inaccurately reporting the payment status of 300,000 borrowers during the pandemic. The company was required to pay $12.8 million in compensation and penalties. The investigation revealed that Honda Finance failed to adhere to its promise of maintaining accurate credit reports for customers who had deferred payments. Additionally, multiple violations of the Fair Credit Reporting Act were identified, including improper handling of consumer disputes and inaccurate reporting to credit agencies.
Financial Repercussions and Customer Impact
Honda Finance has been ordered to pay $10.3 million in restitution to affected customers and an additional $2.5 million civil penalty. This penalty will be directed towards the CFPB’s victims relief fund. The mishandling of customer data resulted in serious consequences for consumers, affecting their credit scores and potentially impacting their ability to secure loans, housing, or employment. The CFPB emphasized the severe implications of false credit report entries, which can have long-lasting effects on individuals' financial lives.
The investigation uncovered that from 2019 to 2024, Honda Finance provided inaccurate information to credit bureaus on over 300,000 occasions. During this period, the company reported borrowers as delinquent instead of current, even when they had deferred payments due to the pandemic. Despite identifying these issues in 2021, Honda Finance did not promptly correct or stop reporting the inaccurate information. This negligence led to continued violations and further harm to consumers. For instance, nearly 85,000 accounts were reported incorrectly for 15 months, while approximately 35,000 accounts were inaccurately marked as unpaid after initially being reported as paid.
Inadequate Policies and Persistent Errors
Honda Finance's failure to establish and implement proper policies regarding the accuracy and integrity of information sent to credit bureaus contributed significantly to the violations. The company also neglected to conduct thorough investigations into consumer disputes and failed to report the results to the affected individuals. These shortcomings allowed errors to persist for years, leading to ongoing consumer harm. The CFPB highlighted the importance of maintaining robust procedures to ensure accurate credit reporting.
Further scrutiny revealed that Honda Finance had inaccurately reported charge-off amounts for roughly 30,000 accounts and failed to provide the date of first delinquency for about 170,000 accounts. Although the derogatory information was not always sent to credit bureaus, the company's failure to correct account balances and past-due amounts for nearly 4,000 accounts remained unresolved. These persistent errors underscored the need for more stringent oversight and compliance measures within the company. The CFPB's intervention aims to rectify these issues and restore trust in Honda Finance's credit reporting practices.