Finance Company and Affiliates Settle with CFPB for Consumer Reporting Violations

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The CFPB recently issued a consent order against a finance company and two of its affiliates for two violations relating to consumer reporting.  The companies agreed to develop compliance procedures and pay statutory fines.

The finance company, which is in the process of dissolving, is subject to this consent order because it purchased foreclosed properties from Freddie Mac and Fannie Mae then resold the properties to individuals, “primarily through seller financing in the form of contracts for deed.”  An affiliated mortgage company provided multiple services to the finance company.  In part, it delivered consumer information from the finance company to consumer-reporting agencies and fielded disputes or inquiries from consumers about that information, making it a furnisher under the definition provided in Regulation V.  A third, previously dissolved, company was also implicated in the consent order.

Regulation V requires furnishers to “investigate written disputes it may receive and to contact the applicable consumer-reporting agency in order to resolve any found errors.”  Furnishers may also investigate disputes based on a consumer’s phone call.  The CFPB found that the mortgage company was contacted by consumers about inaccurate consumer reports related to transactions with the finance company.  However, rather than investigating, it instructed some consumers to contact the consumer-reporting agency in order to resolve the issues.  This not only directly violates the investigation requirements in Regulation V but is also considered a deceptive act in violation of the CFPA.  Regulation V also requires furnishers to establish policies and procedures, in accordance with guidance provided in Appendix E, to ensure accurate consumer information is furnished to consumer-reporting agencies.  The mortgage company had a policy, but it did not comply with Appendix E and therefore was in violation of Regulation V.

The consent order enjoins the companies from misrepresenting how consumers can initiate disputes.  The mortgage company must also establish and implement the policies and procedures required by Regulation V and submit a ”comprehensive compliance plan,” with action steps and deadlines, to the Enforcement Director.  Further, the finance company must pay the CFPB a $25,000 civil penalty.  The mortgage company, along with the third company, are jointly and severally liable for an additional $10,000 penalty, which they may allocate between themselves.  The Consent Order also imposes reporting and recordkeeping requirements on the finance company and the mortgage company.

This Consent Order became effective on the date it was issued, June 19, 2020.  The companies consented “without admitting or denying any of the findings of fact or conclusions of law” asserted by the CFPB except as to jurisdiction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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