CFPB Action Against Santander Over Auto Loan Credit Reporting
How inaccurate auto loan credit reporting led to a federal enforcement action, a civil penalty, and new safeguards for consumers.
The Consumer Financial Protection Bureau (CFPB) issued a consent order against Santander Consumer USA Inc. after finding widespread problems in how the company reported auto loan information to credit bureaus. The case centers on violations of the Fair Credit Reporting Act (FCRA) and its implementing regulation, known as Regulation V, and resulted in a civil money penalty and mandated reforms to Santander’s credit reporting practices.
This article explains what went wrong, what the CFPB required Santander to do, and how auto loan borrowers can protect themselves when lenders furnish information to consumer reporting agencies.
Background: Who Are the Key Players?
The Role of the CFPB
The CFPB is a federal agency created after the financial crisis to enforce federal consumer financial laws and promote fairness and transparency in markets for consumer financial products such as credit cards, mortgages, and auto loans.
- Mandate: Implement and enforce federal consumer financial law, including the FCRA and the Consumer Financial Protection Act of 2010 (CFPA).
- Tools: The agency can conduct examinations, open investigations, bring enforcement actions, and issue consent orders requiring penalties and corrective measures.
Who Is Santander Consumer USA?
Santander Consumer USA is a large auto finance company and a subsidiary of Banco Santander S.A. It focuses heavily on nonprime and subprime auto loans, meaning many of its borrowers have lower credit scores and more limited access to affordable credit.
- Business model: Originates and services auto loans and leases, often for higher-risk consumers.
- Credit reporting: Regularly furnishes data on its auto loans to major consumer reporting agencies (CRAs), typically through monthly data files.
What the CFPB Found: Core Violations
After reviewing Santander’s practices from January 2016 through August 2019, the CFPB concluded that Santander violated the FCRA, Regulation V, and the CFPA in several significant ways.
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| Issue | CFPB Finding | Potential Consumer Impact |
|---|---|---|
| Accuracy of furnished data | Reported information it knew or reasonably should have known was inaccurate. | Lower or distorted credit scores; denial or worse terms on future credit. |
| Updating incomplete information | Failed to promptly correct data later determined to be incomplete. | Outdated derogatory information could linger on reports. |
| Date of first delinquency | Did not furnish the date of first delinquency for some delinquent or charged-off accounts. | Negative items could remain on reports longer than legally permitted. |
| Policies and procedures | Lacked reasonable written policies and procedures to ensure accuracy and integrity of furnished data. | Systemic, repeated errors across many accounts. |
Inaccurate Status of Auto Loan Accounts
The CFPB determined that Santander furnished loan information that was inaccurate in basic and critical ways:
- Incorrectly indicating whether an account was open or closed.
- Misstating whether a consumer still carried a balance or owed future payments.
- Failing to reflect changes in accounts when they occurred, such as payoffs or closures.
Because credit scoring models heavily rely on whether accounts are open, closed, current, or delinquent, these misstatements could significantly influence a consumer’s credit profile.
Failure to Promptly Correct Furnished Information
The FCRA requires companies that furnish information to CRAs to correct and update information if they later learn it is incomplete or inaccurate. The CFPB found that Santander:
- Identified certain data as incomplete or inaccurate but did not quickly update what it furnished.
- Allowed incorrect or partial information to persist in files transmitted to CRAs over time.
Missing Dates of First Delinquency
For accounts that are seriously delinquent or charged off, the date of first delinquency (DOFD) is crucial. Under the FCRA, most negative information cannot be reported for more than seven years from that date.
The CFPB found that Santander failed to provide the DOFD for certain delinquent or charged-off auto loan accounts, creating a risk that negative information might remain on consumer reports longer than allowed by law.
Breakdowns in Policies and Procedures
Regulation V requires furnishers of information to CRAs to have reasonable written policies and procedures to ensure the accuracy and integrity of the information they provide. The CFPB concluded that Santander:
- Did not adequately design or implement such policies and procedures.
- Failed to monitor systemic issues in monthly data files sent to CRAs.
- Allowed widespread errors to persist between 2016 and 2019, affecting large numbers of consumers.
Legal Framework: FCRA, Regulation V, and the CFPA
Fair Credit Reporting Act (FCRA)
The FCRA is a federal law that governs how consumer reporting agencies and data furnishers handle consumer information. Key goals include promoting accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
- Accuracy duty: Companies must not furnish information they know or reasonably should know is inaccurate.
- Correction duty: Furnishers must promptly correct and update information that is incomplete or inaccurate.
- Obligation to report DOFD: For delinquent or charged-off accounts, furnishers must report the date of first delinquency to help ensure timely removal of negative information.
Regulation V
Regulation V implements the FCRA and sets more detailed requirements for furnishers of information, including the need for written policies and procedures to ensure accuracy and integrity. These policies must be appropriate to the nature, size, and complexity of the furnisher’s activities.
Consumer Financial Protection Act (CFPA)
The CFPB determined that Santander’s violations of the FCRA and Regulation V also constituted violations of the CFPA, which prohibits unfair, deceptive, or abusive acts or practices in connection with consumer financial products or services.
Consequences for Santander: Penalties and Required Reforms
Civil Money Penalty
The consent order imposed a $4,750,000 civil money penalty on Santander. Civil penalties in CFPB cases serve both as punishment for past violations and as a deterrent against similar conduct by the company or others in the market.
Mandated Corrective Actions
In addition to the penalty, the CFPB’s consent order requires Santander to take comprehensive steps to improve its credit reporting practices and prevent future violations.
- Correct inaccuracies: Identify and fix all errors and inaccuracies the CFPB found in previously furnished data.
- Monthly data reviews: Conduct ongoing reviews of account information to assess accuracy and integrity of the information furnished to CRAs.
- Strengthen policies: Establish and implement reasonable, written policies and procedures to ensure data accuracy and integrity, tailored to the scale of its auto lending operations.
- Compliance oversight: Maintain systems, training, and controls to monitor compliance with the FCRA, Regulation V, and the CFPA.
Why Accurate Auto Loan Reporting Matters to Consumers
Auto loans are often one of the largest and longest-term debts consumers take on, especially for those with lower credit scores. Inaccurate reporting of auto loan data can harm consumers in several ways.
- Credit scores: Misreporting an account as open when it is closed, or as delinquent when it is current, can damage credit scores and make other borrowing more expensive or inaccessible.
- Access to credit: Lenders rely heavily on credit reports to decide whether to extend credit and on what terms; inaccurate derogatory information may lead to denials or higher interest rates.
- Duration of negative information: If the date of first delinquency is missing or incorrect, negative marks may stay on a report longer than the law allows.
- Financial opportunity: Consumers trying to refinance an auto loan, qualify for a mortgage, or obtain a credit card may lose opportunities because of errors beyond their control.
What Borrowers Can Do to Protect Themselves
Although this enforcement action targets a specific lender, it highlights steps any consumer can take to guard against credit reporting harm.
1. Check Your Credit Reports Regularly
Federal law gives consumers the right to obtain free credit reports from major CRAs. Monitoring these reports helps detect inaccuracies early so they can be disputed and corrected.
- Look for unfamiliar accounts or lenders.
- Verify that closed auto loans are reported as closed with a zero balance.
- Confirm that any delinquencies or charge-offs are accurate and not duplicated.
2. Dispute Errors Promptly
If you find incorrect information, you can submit disputes to both the credit reporting agency and the furnisher (for example, your auto lender). The FCRA requires CRAs to investigate disputes and either verify, correct, or delete disputed information, usually within 30 days.
3. Keep Documentation
Maintain records of auto loan contracts, monthly statements, payoff letters, and any correspondence with the lender.
- These documents can support your position if you dispute inaccurate reporting.
- Having proof of payoff dates or modifications can be especially important when status or balances are misreported.
4. Know When to Seek Help
Consumers who cannot resolve credit reporting problems directly with the CRA or lender can submit complaints to the CFPB. The CFPB forwards complaints to companies for response and may also use complaint data to help identify patterns of wrongdoing for further investigation.
Broader Context: Auto Lending and Consumer Protection
The CFPB’s action over credit reporting issues is one of several government and multistate efforts scrutinizing auto lending and servicing practices, especially in the subprime segment.
- State attorneys general have reached separate settlements with Santander involving allegations of risky and unaffordable subprime auto lending.
- These cases highlight concerns about both how loans are originated (ability to repay, verification of income) and how they are later serviced and reported to CRAs.
Together, these actions illustrate that regulators view accurate credit reporting as a core consumer protection issue, particularly for borrowers with fewer alternatives and higher borrowing costs.
Frequently Asked Questions (FAQs)
Q1: Did the CFPB action provide direct refunds to affected consumers?
The consent order discussed here primarily requires Santander to pay a civil money penalty to the government and to correct and improve its credit reporting practices. It focuses on fixing inaccuracies and strengthening policies rather than setting out a detailed consumer restitution program in the same way some other enforcement actions do.
Q2: How could inaccurate auto loan reporting affect my everyday finances?
If your auto loan is inaccurately reported as delinquent, open when it is closed, or still carrying a balance, your credit score could be lower than it should be. That can lead to higher interest rates on new loans or credit cards, difficulty renting housing, or even higher insurance premiums, depending on state law and insurer practices.
Q3: What is the “date of first delinquency,” and why is it important?
The date of first delinquency is the month and year you first became delinquent on an account and did not bring it current again. Under the FCRA, most negative items must be removed from your credit report seven years after that date, so accurately furnishing this date helps ensure that old negative information does not remain longer than the law allows.
Q4: Does the CFPB oversee all auto lenders?
The CFPB has authority over many larger participants in the auto financing market, including large banks and nonbank auto finance companies, and can enforce federal consumer financial laws against them. Smaller lenders may also be subject to federal and state oversight through other agencies or state regulators.
Q5: What should I do if my lender does not fix an obvious credit reporting error?
You can send a written dispute to the credit bureau and the lender, include supporting documentation, and keep copies for your records. If the issue remains unresolved, you can file a complaint with the CFPB, which will forward it to the company for a response and may use it as part of its supervisory and enforcement work.
References
- Consumer Financial Protection Bureau Settles with Santander Consumer USA Inc. for Credit Reporting Violations in Connection with Its Auto Loans — Consumer Financial Protection Bureau. 2020-12-22. https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-settles-with-santander-consumer-usa-inc-for-credit-reporting-violations-in-connection-with-its-auto-loans/
- Santander Consumer USA Inc. (Enforcement Action Summary) — Consumer Financial Protection Bureau. 2020-12-22. https://www.consumerfinance.gov/enforcement/actions/santander-consumer-usa-inc-2020/
- Carr Announces Consumer Settlement with Santander, Millions to Be Returned — Georgia Office of the Attorney General. 2020-05-20. https://law.georgia.gov/press-releases/2020-05-20/carr-announces-consumer-settlement-santander-millions-be-returned
- Attorney General Josh Stein Announces More than $550 Million Settlement with Largest U.S. Subprime Auto Financer — North Carolina Department of Justice. 2020-05-19. https://ncdoj.gov/attorney-general-josh-stein-announces-more-than-550-million-settlement-with-largest-u-s-subprime-auto-financer/
- AG Grewal Announces Settlement with Santander in Multi-state Investigation of Allegedly Predatory Subprime Auto Lending Practices — New Jersey Office of the Attorney General. 2020-05-20. https://www.njoag.gov/ag-grewal-announces-settlement-with-santander-in-multi-state-investigation-of-allegedly-predatory-subprime-auto-lending-practices-new-jersey-and-nj-residents-will-receive-over-3-million-in-ad/
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