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Prepared Remarks of CFPB Director Richard Cordray on the First Investors Press Call

Thank you for joining us. Today the Consumer Financial Protection Bureau is taking action against an auto finance company that distorted consumer credit records for years. Texas-based First Investors Financial Services Group systemically provided information to credit reporting agencies that it knew was inaccurate, potentially harming tens of thousands of customers. Today we are ordering the company to pay a $2.75 million fine, fix the mistakes it has caused, and change the way it does business.

Consumers are harmed when companies furnish inaccurate information to credit reporting agencies. Incorrect reports on file at credit reporting agencies – such as Experian, TransUnion, and Equifax − distort the true picture of how consumers have performed on their loans. An error could make a big difference in whether someone receives a loan, qualifies for a low interest rate, or even gets offered a job. It has the potential to disqualify people for rental housing or raise their premiums for auto insurance.

This is particularly true of First Investors’ customers, many of whom were subprime borrowers to begin with – a population that the company strategically targeted. When First Investors knowingly sent the wrong information to the credit reporting agencies, it put consumers with credit profiles that were already impaired into an even more perilous position.

Our investigation found that for three years First Investors had a flawed computer system − purchased from a vendor − that provided inaccurate information to credit reporting agencies. When First Investors discovered the problem in April 2011, it notified the vendor but did nothing more. The company did not replace the system or take any steps to correct the inaccurate information it had supplied. Instead, it simply continued for years to use a system that it knew was flawed.

There were all kinds of inaccuracies reported by First Investors. The company frequently understated how much consumers were paying toward their debt. It overstated the amount past due. It misreported the dates when consumers became delinquent. And it inflated the number of delinquent payments. In one case, it reported that a consumer was delinquent 11 times when in fact that consumer had only been delinquent twice.

First Investors also mischaracterized vehicle surrenders. It told credit reporting agencies that some of its customers had their vehicles repossessed when, in fact, those individuals had voluntarily surrendered their cars. It looks very different on a credit profile to turn the car over to the lender voluntarily, as opposed to the lender tracking down the car and towing it away without the consumer’s consent.

The Bureau recognizes that this kind of careless disregard harms consumers. First Investors knew there was a problem with its computer system but did not make sufficient efforts to fix the errors. This is against the law.

So today we are ordering First Investors to pay a $2.75 million fine for these problems. It must identify all the consumer credit profiles that were affected and fix them. We are also ordering the company to change the way it does business. It must repair the significant, systemic problems in how it has been furnishing information to the national credit reporting agencies. The company must establish consumer safeguards so this does not happen again. And finally, First Investors will help all affected consumers receive free copies of their credit reports so consumers can check the accuracy of their reports for themselves.

Today’s action sends a signal to all companies that supply information to the credit reporting agencies that they must have sound practices in place that protect consumers. You cannot pass the buck on this responsibility. Using a flawed computer system purchased from an outside vendor does not get you off the hook for meeting your own obligations.

Companies that report information about consumers to credit reporting agencies have legal obligations under the Fair Credit Reporting Act. This federal law applies to all companies that furnish information to credit reporting companies, whether they furnish to one of the big three credit reporting agencies or to a smaller firm like a tenant screening company or a check verification service. Data furnishers have the legal duty to identify consumers accurately, correctly recount the consumers’ payment histories, and keep their own information and record-keeping in order.

Data furnishers should take all necessary steps to ensure they are complying with federal laws. They should monitor consumer reporting disputes for patterns or indications of systemic inaccuracies. They should promptly modify or delete inaccurate information when it comes to their attention. They should make sure that any products or vendors they use to perform these duties are doing so accurately and legally. Some are doing this better than others, and some are not doing what they promise or what federal law requires.

Any furnisher not currently meeting these requirements should take immediate steps to abide by the law. We will continue to monitor this market carefully, and we will not hesitate to take further enforcement actions as they are needed. Thank you.

The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit