CFPB Sanctions Honda Finance Over COVID-19 Credit Reporting
How inaccurate auto loan credit reporting during the COVID-19 emergency led to a $12.8 million action against Honda’s finance arm.
The Consumer Financial Protection Bureau (CFPB) ordered American Honda Finance Corporation, the financing arm for Honda and Acura vehicles in the United States, to pay $12.8 million over serious credit reporting failures linked to COVID-19 payment deferrals and other violations of federal law. This decision highlights how inaccurate credit reporting can damage consumers’ financial lives, especially during a national emergency.
This article explains what the CFPB found, how borrowers were harmed, what laws were violated, and what this case means for consumers, auto lenders, and credit reporting practices more broadly.
Background: Who Is Honda Finance and What Did the CFPB Review?
American Honda Finance Corporation is a nonbank automotive finance company that buys and services vehicle loans and leases arranged by Honda and Acura dealerships across the United States. It is headquartered in Torrance, California and is a wholly owned subsidiary of American Honda Motor Co., Inc.
As part of its business, Honda Finance regularly sends information about borrowers’ accounts to the major consumer reporting agencies. That information in turn appears on consumers’ credit reports and is used by lenders, landlords, and others to evaluate risk.
The CFPB investigated Honda Finance’s practices related to:
- How the company reported auto loans and leases to credit reporting agencies.
- How it treated borrowers who received COVID-19 payment deferrals.
- How it handled disputes and correction requests related to credit report information.
- Whether it maintained reasonable policies and procedures to ensure accuracy and integrity of furnished data.
Key Finding: Misreporting COVID-19 Deferrals as Delinquencies
During the COVID-19 pandemic, Honda Finance allowed certain customers to defer vehicle loan payments, offering temporary relief to borrowers experiencing hardship. According to the CFPB, the company also communicated that these deferred accounts would continue to be reported to credit reporting companies as current, not delinquent.
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Instead, the CFPB found that Honda Finance:
- Reported many borrowers in deferral as delinquent when payments were not required during the deferral period.
- Continued to furnish information it knew, or had determined, to be inaccurate in several categories.
- Ultimately affected the credit reports of roughly 300,000 consumers with Honda and Acura accounts.
These inaccurate derogatory marks could lower consumers’ credit scores, making it more expensive—or sometimes impossible—to obtain loans, credit cards, housing, or employment opportunities. CFPB Director Rohit Chopra described the practices as “sloppy” and emphasized that false negative information can have serious implications for people seeking jobs, housing, or credit.
Other Credit Reporting Failures Identified by the CFPB
Beyond the COVID-19 deferral issue, the CFPB identified additional problems with Honda Finance’s credit reporting practices.
1. Failure to Properly Investigate Disputes
When consumers or credit reporting agencies dispute information, data furnishers such as auto lenders must conduct a reasonable investigation and correct any errors. The CFPB found that Honda Finance:
- Did not adequately investigate some disputes about the accuracy of account information furnished to credit reporting agencies.
- Failed, in certain instances, to send the results of investigations to the credit reporting agencies and to consumers, as required.
- Continued to furnish disputed information even after determining that some of it was incomplete or inaccurate.
2. Inadequate Policies and Procedures for Furnishing Data
Under the Fair Credit Reporting Act (FCRA) and its implementing regulation, Regulation V, furnishers must maintain written policies and procedures designed to ensure the accuracy and integrity of data they report. The CFPB concluded that Honda Finance failed to implement reasonable policies and procedures to prevent the types of errors and omissions identified in the investigation.
In practice, this meant that:
- Controls to prevent erroneous delinquency reporting were insufficient.
- Systems and processes did not adequately capture the special status of COVID-19 deferrals.
- Dispute-handling protocols were not robust enough to ensure errors were corrected in a timely and complete manner.
Legal Authority: Laws Honda Finance Violated
The CFPB concluded that Honda Finance violated multiple federal consumer financial protection laws.
| Law / Regulation | Purpose | How Honda Finance Violated It (per CFPB) |
|---|---|---|
| Fair Credit Reporting Act (FCRA) | Promotes accuracy, fairness, and privacy of information in consumer reporting systems. | Furnished false and harmful information; misreported deferred accounts as delinquent; failed to reasonably investigate disputes. |
| Regulation V | Implements FCRA, including duties of furnishers to credit reporting agencies. | Did not maintain reasonable written policies and procedures to ensure accuracy and integrity of furnished data. |
| Consumer Financial Protection Act of 2010 (CFPA) | Prohibits unfair, deceptive, or abusive acts or practices in consumer finance markets. | Engaged in conduct the CFPB viewed as unfair by harming consumers through inaccurate reporting and inadequate dispute handling. |
The CFPB’s Order: Financial Penalties and Corrective Actions
Exercising its enforcement authority under the CFPA, the CFPB imposed both monetary penalties and non-monetary corrective obligations on Honda Finance.
Monetary Relief
- $10.3 million in consumer redress: Honda Finance must provide financial relief to consumers harmed by its inaccurate credit reporting and related failures.
- $2.5 million civil money penalty: The company must pay this penalty to the CFPB’s civil penalty fund, which is used for payments to harmed consumers in CFPB enforcement actions.
Compliance and Remedial Requirements
In addition to monetary relief, the order requires Honda Finance to take several steps to come into compliance and protect consumers going forward.
Key obligations include:
- Correct prior credit reporting errors related to affected borrowers, including those whose accounts were placed in COVID-19 deferral status but reported as delinquent.
- Enhance policies and procedures governing furnishing of data to credit reporting agencies to ensure improved accuracy and integrity.
- Improve dispute investigations by ensuring disputes are thoroughly reviewed, results are communicated to both credit reporting agencies and consumers, and erroneous information is promptly updated or deleted.
- Maintain compliance oversight and internal controls to prevent recurrence of similar violations.
Impact on Consumers: Why Inaccurate Reporting Matters
Credit reports are central to modern consumer finance. Errors like those identified in this case can have far-reaching consequences.
Potential Harms to Affected Borrowers
The approximately 300,000 consumers whose accounts were affected may have experienced one or more of the following harms:
- Lower credit scores due to inaccurate delinquency notations, potentially increasing borrowing costs on mortgages, credit cards, and other loans.
- Credit denials if lenders viewed the reported delinquencies as signs of elevated risk.
- Loss of housing opportunities where landlords used credit reports in rental screening.
- Employment impacts in situations where employers legally obtained and reviewed credit histories.
These harms are particularly significant in the context of a national emergency like the COVID-19 pandemic, when many consumers relied on deferrals and forbearance programs to stay afloat. Federal agencies emphasized the importance of properly handling COVID-19 relief measures in credit reporting to avoid unjust penalties for borrowers who accepted assistance.
CFPB’s Broader Focus on Auto Lenders and Credit Reporting
The action against Honda Finance is part of a broader enforcement trend targeting auto finance companies and other large furnishers that provide inaccurate data to credit bureaus.
In recent years, the CFPB has taken similar actions against other major auto lenders:
- Hyundai Capital America – ordered to pay $19 million in 2022 for widespread credit reporting failures.
- Toyota Motor Credit Corporation – ordered to pay $60 million in 2023 for illegal lending and credit reporting misconduct.
Additionally, the CFPB has reinforced expectations around the accuracy of credit reporting systems more generally, including actions against large credit reporting agencies such as Equifax over failure to remove errors.
For Honda, this is not its first encounter with the CFPB. In a prior case, the Bureau took action against the company for illegal discrimination in dealer markups that resulted in higher interest charges for certain racial and ethnic groups, leading to a $24 million redress agreement.
Lessons for Auto Lenders and Other Data Furnishers
The Honda Finance case offers several compliance lessons for lenders, servicers, and any other entities that furnish data to consumer reporting agencies.
1. Treat Relief and Deferral Programs with Extra Care
Special programs—whether in response to a pandemic, natural disaster, or economic downturn—often involve non-standard payment statuses. Furnishers must ensure that their systems correctly reflect:
- When payments are not required due to a deferral or forbearance.
- How those accounts should be reported (for example, as current rather than delinquent, where applicable guidance or agreements require it).
- What has been communicated to consumers about how their accounts will appear on credit reports.
2. Strengthen Policies, Procedures, and Testing
Written policies and procedures should not be treated as mere paperwork. They must be:
- Tailored to actual business operations and system architecture.
- Updated when new products, relief programs, or system changes are introduced.
- Supported by ongoing testing, monitoring, and quality assurance reviews of furnished data.
3. Take Dispute Handling Obligations Seriously
Under FCRA and Regulation V, furnishers must reasonably investigate disputes and correct any inaccuracies that are identified. This requires:
- Clear internal workflows for receiving and tracking disputes from both credit bureaus and consumers.
- Access to the records and system data necessary to conduct a meaningful review.
- Timely communication of results and updates back to the credit reporting agencies and to affected consumers.
4. Prioritize Consumer Harm Prevention
Regulators increasingly expect institutions to focus not just on technical compliance, but on avoiding consumer harm. That includes:
- Promptly identifying patterns of potential errors through complaint analysis and internal monitoring.
- Quickly stopping the spread of known inaccuracies.
- Providing remediation to consumers when harm is discovered.
What Consumers Can Do if They Suspect Credit Reporting Errors
Consumers whose auto loans or leases were in COVID-19 deferral—or who believe any information on their credit report is incorrect—can take several steps to protect themselves.
Check Your Credit Reports Regularly
Consumers are entitled to free credit reports from each of the nationwide consumer reporting agencies. Reviewing reports makes it easier to spot errors such as:
- Accounts incorrectly reported as delinquent or charged off.
- Duplicate accounts or balances that appear too high.
- Incorrect dates, statuses, or personal information.
Dispute Inaccurate Information
If you find an error, you can dispute it with both:
- The credit reporting agencies that are displaying the incorrect information; and
- The furnisher (such as an auto lender) that provided the information.
Include supporting documentation where possible, such as statements showing deferral agreements, correspondence with the lender, or payment histories.
Leverage Regulatory and Legal Rights
FCRA and related laws provide rights to consumers, including:
- The right to dispute inaccurate information and have it corrected or removed if the furnisher cannot verify its accuracy.
- The right to receive notice when certain negative information is placed on a credit report in connection with a credit denial or other adverse action.
- Potential legal remedies when willful or negligent non-compliance with FCRA causes harm.
Frequently Asked Questions (FAQs)
Q1: Why did the CFPB say Honda Finance’s conduct was especially harmful during COVID-19?
During the COVID-19 national emergency, many borrowers relied on payment deferrals to stay current without being penalized. The CFPB found that Honda Finance reported deferred accounts as delinquent despite indicating they would be treated as current, effectively punishing borrowers for accepting relief designed to help them.
Q2: How many consumers were affected by Honda Finance’s inaccurate reporting?
According to the CFPB, the inaccurate information furnished by Honda Finance affected the credit reports of approximately 300,000 Honda and Acura drivers.
Q3: What total amount did Honda Finance have to pay under the CFPB order?
The CFPB ordered Honda Finance to pay a total of $12.8 million: $10.3 million in redress to harmed consumers and a $2.5 million civil money penalty to the Bureau’s civil penalty fund.
Q4: What laws did the CFPB say Honda Finance violated?
The CFPB determined that Honda Finance violated the Fair Credit Reporting Act (FCRA), its implementing Regulation V, and provisions of the Consumer Financial Protection Act related to unfair, deceptive, or abusive acts or practices.
Q5: Is Honda the only auto lender the CFPB has penalized for credit reporting failures?
No. The CFPB has taken similar actions against other auto lenders, including Hyundai Capital America and Toyota Motor Credit Corporation, for widespread credit reporting failures and related misconduct.
References
- CFPB Orders Honda’s Auto Financing Arm to Pay $12.8 Million for COVID-19 and Other Credit Reporting Failures — Consumer Financial Protection Bureau. 2025-01-17. https://www.consumerfinance.gov/enforcement/actions/american-honda-finance-corporation-2025/
- CFPB Orders Honda’s Auto Financing Arm to Pay $12.8 Million for COVID-19 and Other Credit Reporting Failures (Press Release PDF) — Consumer Financial Protection Bureau. 2025-01-17. https://business.cch.com/BFLD/CFPBOrdersHondasAutoFinancingArmtoPay-20250121.pdf
- CFPB Fines American Honda Finance for COVID-19 and Other Credit Reporting Failures — Compliance Cohort. 2025-01-21. https://www.compliancecohort.com/blog/cfpb-fines-american-honda-finance-for-covid-19-and-other-credit-reporting-failures
- CFPB Orders Honda Financial Services to Pay $12.8M for Allegedly Inaccurate Credit Reporting During COVID-19 Crisis — ClassAction.org. 2025-01-22. https://www.classaction.org/news/cfpb-orders-honda-financial-services-to-pay-12.8m-for-allegedly-inaccurate-credit-reporting-during-covid-19-crisis
- CFPB Penalties Against American Honda Finance & Equifax Approach $30M — Auto Remarketing. 2025-01-24. https://www.autoremarketing.com/subprime/cfpb-penalties-against-american-honda-finance-equifax-approach-30m/
- CFPB Orders Equifax to Pay $15 Million Over Failure to Remove Errors on Credit Reports — National Consumer Law Center. 2025-01-17. https://www.nclc.org/cfpb-orders-equifax-to-pay-15-million-over-failure-to-remove-errors-on-credit-reports/
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