January 19, 2021

Santander agrees to $4.7 million settlement over credit reporting errors

Subprime auto lender Santander Consumer USA settled with the Consumer Financial Protection Bureau for sending incorrect or incomplete information to credit reporting agencies, the federal watchdog said last month.

Santander, which is the largest subprime lender in the U.S., agreed to pay more than $4.7 million in civil penalties over allegations that the bank sent inconsistent information about consumer auto loans to credit reporting agencies between January 2016 and August 2019.

The information, according to the agency, “contained many systemic errors” that Santander should have known were false at the time or failed to correct in a timely manner. The missing or erroneous data “could have negatively impacted consumers’ credit scores and access to credit,” the agency said in a statement.

For example, Santander furnished information to credit bureaus about severely delinquent or charged-off auto accounts, but not the dates of the first delinquency on those accounts, according to the consent order. Negative information such as late payments are removed from customer accounts after seven years under the Fair Credit Reporting Act based on the date of the first delinquency. Without this information, the Consumer Financial Protection Bureau said negative data relating to the auto loans with Santander could not be removed from the customer accounts.

Additionally, the agency said Santander inconsistently reported whether auto accounts were open or closed, and whether consumers carried a balance or still had payments.

“We are pleased to resolve this legacy issue and put the matter behind us,” Laurie Kight, a Santander Consumer USA spokeswoman, said in an emailed statement.

This is the second consent order Santander entered into in 2020 for violations against subprime auto customers. The public company agreed in May to pay $65 million in restitution as part of a settlement with 33 states and the District of Columbia for placing borrowers with subprime credit into auto loans the lender knew had a high probability of default. The lender also agreed to waive deficiency balances on $478 million in auto loans as part of the settlement, and allotted $7 million to states to manage restitution claims.

Santander’s conduct violated the Fair Credit Reporting Act and the Consumer Financial Protection Act of 2010, according to the Consumer Financial Protection Bureau. The consent order, announced Dec. 22, also requires the lender “take certain steps to prevent future violations” that include conducting monthly reviews of account information and implementing reasonable policies and procedures to ensure accurate reporting.