Credit reporting agencies were given erroneous information for more than one million people who had auto loans last year in the U.S. That figure represents about one percent of all auto loans in the country. The errors were traced back to software mistakes in the source code utilized by Conduent Business Services.
While Conduent officials knew for years about the flawed software which caused the faulty information to be reported, it didn’t share the fact there were any errors with the auto lenders it worked with. The error impacted a large percentage of accounts that were handled by Conduent.
For its role in the false information being reported about those borrowers, the Consumer Financial Protection Bureau penalized Conduent in November 2017. The company was ordered to cough up a $1.1 million penalty fee, come clean about its errors, and take steps to correct the flawed software to prevent mistakes like this from being made in the future.
How This Could Affect Consumers
Some of the loan information that was mistakenly reported pertained to whether accounts were delinquent and how much was left on the loan balance.
The penalty was handed down because errors in credit reports can have a wildly negative effect on consumers. It can affect their future credit applications and endanger their chances of securing loans for important items such as homes and vehicles. The false information could have also led to higher interest rates for future loans since it would have been based off of the erroneous information supplied by Conduent to the credit reporting agencies.
In addition, credit report mistakes can be enough to prevent people from being hired for certain jobs.
Conduent’s Knowledge about Complaints
Conduent was created in 2017 as a divestiture of Xerox. It employs almost 100,000 people in 40 countries, and it provides information to five automobile lenders.
The first complaint about Conduent’s software issue appeared in 2011. But that wasn’t the only indication there was a problem. Conduent also was informed about the software glitch in 2012 by an independent software developer.
Changes weren’t made, however, until 2014. And even then, those changes weren’t made across the board. Only one company that complained about the problem was given a solution – the others were kept in the dark.
At the time of these incidents, Conduent was handling over 6.4 million car loan accounts, so a large percentage of the accounts they tracked were impacted by this faulty software and the decision to keep quiet about the errors.
This problem with Conduent and its lack of transparency might serve to further erode confidence consumers have in the lending industry. It might also worry economic insiders who remember the burst in the housing bubble which began in the previous decade. That industry was once figured to be untouchable, much like the auto industry.
Interestingly, many have noted that automobile repossessions and delinquencies have been increasing, which may mean there is an overall problem with the underwriting and lending criteria when it comes to vehicles.