Regulator: CarHop to Pay $6.4M Penalty for Damaging Consumers’ Credit

Minnesota-based CarHop, one of the country’s biggest “buy-here, pay-here” auto dealers, and its affiliated financing company, Universal Acceptance Corporation, provided “damaging and inaccurate” consumer information to credit reporting companies, according to the U.S. Consumer Financial Protection Bureau (CFPB), which imposed a $6.4 million penalty against the companies.

The CFPB said its investigation found that the companies inaccurately reported information for more than 84,000 accounts on a “widespread and systemic basis.” The CFPB is ordering the companies to cease their illegal activities and pay a $6,465,000 civil penalty.
“Many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills,” said CFPB Director Richard Cordray. “But CarHop and Universal Acceptance Corporation thwarted those expectations by inaccurately furnishing negative credit information. The CFPB will not stand for companies whose sloppy actions jeopardize consumers’ credit.”
CarHop, also known as Interstate Auto Group, is one of the largest”buy-here, pay-here” auto dealers in the nation. These dealers sell cars and originate and service the auto loan. CarHop has about 50 retail locations in approximately 15 states.
CarHop sells vehicles primarily to customers with nonexistent or poor credit histories in need of subprime or deep subprime credit. It markets itself as a way for these consumers to rebuild or build-up good credit by saying it will provide positive payment histories to the credit reporting companies. Consumers who buy from CarHop frequently do so because they suffer from poor credit scores and other financial challenges.
Universal Acceptance Corporation, on behalf of CarHop, furnishes consumer account information to all three major consumer reporting companies on a monthly basis. The CFPB found that the company reported information that it knew, or had reasonable cause, to believe was inaccurate.
Almost all the information the companies inaccurately furnished to the credit reporting companies could potentially harm customers. The negative information could lower a consumer’s credit score, hamper their ability to obtain other credit, and hurt their job prospects. The CFPB found that CarHop and Universal Acceptance Corporation violated the Fair Credit Reporting Act and the Consumer Financial Protection Act.

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