CFPB Orders Honda to Pay $12.8 Million for Credit Reporting Blunders

It was a mistake that left a lot of people scratching their heads. Around 300,000 Honda and Acura drivers found themselves wrongly flagged as delinquent on their credit reports, despite having done nothing wrong. The culprit was a misstep by the American Honda Finance Corporation (Honda Finance), which has now been hit with a hefty $12.8 million penalty by the Consumer Financial Protection Bureau (CFPB).

Let’s rewind to the height of the COVID-19 pandemic. In a show of goodwill, Honda Finance allowed customers to defer their auto loan payments — a lifeline for many who were struggling financially. The company made a promise: during the deferral period, those drivers wouldn’t see their credit reports harmed. But that promise didn’t hold up. Despite the deferrals, Honda Finance reported those consumers as delinquent to the credit reporting agencies, even though they weren’t behind on payments.

“Honda Finance mishandled this situation in a way that had real consequences for people’s financial lives,” said CFPB Director Rohit Chopra. “False accusations on a credit report can have serious implications for Americans seeking a job, housing, or a loan.”

Honda Finance’s failures didn’t stop there. The CFPB’s investigation revealed that the company also mishandled consumer disputes. When customers raised concerns about inaccurate information on their credit reports, Honda Finance didn’t properly investigate these disputes — nor did they provide consumers or credit reporting agencies with the results of their investigations. As a result, harmful information lingered on credit reports, causing more damage to consumers' credit standing.

A Hefty Price Tag

Now, Honda Finance is paying the price. Under the CFPB’s order, the company is required to pay $10.3 million in redress to the 300,000 consumers whose credit reports were tainted. In addition, they’ll also pay a $2.5 million civil penalty to the CFPB’s victims relief fund.

It’s worth noting that this isn’t Honda Finance’s first run-in with the CFPB. Back in 2015, the company was called out for discriminatory lending practices. Honda Finance was found to be charging African American, Hispanic, and Asian/Pacific Islander borrowers higher interest rates on their auto loans, regardless of their creditworthiness. In that case, Honda Finance paid $24 million in redress to resolve the issue.

The Honda Finance case is part of a much broader push by the CFPB to ensure accuracy in the credit reporting system. Credit reports play a huge role in people’s financial lives. They can influence everything from the interest rate on a car loan to the ability to secure a mortgage. When the system gets it wrong, the consequences are significant.

This move against Honda Finance echoes similar actions taken by the CFPB against other auto lenders like Hyundai and Toyota. The Bureau has also cracked down on major credit reporting agencies like Equifax, which was fined $15 million for failing to properly investigate disputed credit report information.

As the pandemic continues to shape our financial landscape, it’s crucial that companies — especially those in the business of handling consumers’ financial data — uphold the highest standards of accuracy and fairness. The CFPB’s actions remind us all of the importance of holding these companies accountable, not just for the sake of the bottom line, but for the well-being of consumers.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.