The Consumer Financial Protection Bureau ordered American Honda Finance Corporation to pay $12.8 million for inaccurately reporting 300,000 borrowers as delinquent rather than having their payments paused during the COVID-19 pandemic.
On Friday, the CFPB said in a consent order that Honda Finance had allowed borrowers to defer auto loan payments and promised to continue reporting those consumers as current to credit reporting agencies. However, the CFPB found that Honda Finance had reported those borrowers as delinquent. An investigation by the CFPB also found multiple failures in investigating disputes and reporting them to credit reporting agencies, violations of the Fair Credit Reporting Act.
The company agreed to pay $10.3 million to customers who were harmed and another $2.5 million civil money penalty for damaging borrowers' credit. That $2.5 million fine will be added to the CFPB's victims relief fund.
"Honda Finance used sloppy practices that smeared the credit reports of hundreds of thousands of its customers," CFPB Director Rohit Chopra said. "False accusations on a credit report can have serious implications for Americans seeking a job, housing, or a loan."
The CFPB opened its investigation in early 2024. A spokesperson for Honda Finance said the Torrance, California-based company "has not admitted any wrongdoing but resolved this matter to better focus on its customers."
"AHFC will continue its efforts to provide the best possible financing experience for its customers," said Marcos Frommer, the spokesman. The nonbank auto finance company of American Honda Motor services loans and leases arranged by Honda and Acura dealerships and sends data on borrowers to credit reporting agencies.
The CFPB said that Honda Finance violated the FCRA by providing "false and harmful information" that ended up on borrowers' credit reports. In the course of its investigation, the CFPB found several instances in which the company failed to conduct appropriate investigations of customer disputes.
From 2019 through 2024, Honda Finance furnished inaccurate or incomplete information to credit bureaus on more than 300,000 occasions. The company then failed to promptly correct or update the inaccurate or incomplete information and, despite determining that the information was inaccurate, failed to stop reporting it to credit reporting agencies, the bureau said.
Honda Finance failed to create and implement "reasonable written policies and procedures regarding the accuracy and integrity of information" furnished to credit bureaus, the CFPB found. Honda Finance also failed to conduct and investigate disputes or report the results to consumers. Though the company identified some of the issues in 2021, they remained unresolved for years, resulting in continued violations and consumer harm, the CFPB said.
For 15 months, from early 2020 to mid-2021, Honda Finance agreed to defer payments for nearly 85,000 accounts but reported them as delinquent — rather than current — during the deferral period. In addition, the company did not promptly correct the status of nearly 35,000 accounts that it initially reported as paid, but later inaccurately reported the accounts were not paid, according to the
In addition, Honda Finance failed to promptly correct its reporting on roughly 30,000 accounts after determining that the amount originally charged off — when a creditor writes off an unpaid debt as a loss and gives up on collecting it — had been reported inaccurately. The company had reported the accounts as charged off, but did not report any charge-off amounts.
Further, Honda Finance found in 2021 that it had failed to report the date of a first delinquency for roughly 170,000 accounts and did not promptly correct the issue, though in nearly all of these cases the derogatory information was not sent to credit bureaus. The company also failed to correct the account balances or amounts past due for nearly 4,000 accounts after finding that it was reporting less than the amount past due, the bureau said.
