The CFPB recently ordered Hyundai Capital America (Hyundai) to pay $19 million for widespread credit reporting failures, their largest FCRA case against an auto servicer. Hyundai is one of the largest data furnishers in the US, and according to the CFPB's report, their credit reporting practices have had a “major impact on the credit scores of millions of Americans.”
Consumer credit reporting is of specific interest to the CFPB right now, and their announcement on July 26, 2022 should make that crystal clear to data furnishers.
Most creditors and lenders aren’t servicing nearly that number of consumers, but the action does signal that the risk in credit reporting has just gone up. And there are clear steps creditors can take to reduce regulatory risk and avoid that same fate.
Here are three lessons collections & recovery executives can take away from the CFPB's Hyundai action now:
- Remediate internal audit findings quickly. According to the CFPB’s findings that lead to the Hyundai order, Hyundai identified many of the issues that lead to inaccurate data furnishing via internal audits, but “took years to address the problem.” This shouldn’t be limited to data furnishing processes, either. The purpose of internal audits is to identify potential problems and fix them before a CFPB examination, so when a finding comes up, fix it.
- Stay away from manual processes. The CFPB cites Hyundai’s “use of ineffective manual processes and systems” as a primary reason for their noncompliance with the FCRA and CFPA (Consumer Financial Protection Act). In some cases, their automated system would override manual corrections made by employees, resulting in inaccurate monthly updates to credit reporting companies.
- Keep your policies and procedures updated. The FCRA requires “furnishers to maintain written policies and procedures regarding the accuracy and integrity of the information furnished.” According to the CFPB’s findings, Hyundai did not review or update its reporting furnishing policies from 2010 to 2017. As with the above advice for remediating internal audit findings, this one is a lesson that can be applied broadly. Update those policies and procedures and integrate yearly reviews (at minimum) into your policy maintenance plan.
Following these rules when it comes to credit reporting doesn’t mean the CFPB won’t examine you, but it does mean you’ll be better prepared to pass that examination without facing the same regulatory, financial, and reputational consequences as Hyundai.
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