Car Hop Ordered to cease harming consumers’ credit

So-called “Buy Here Pay Here” dealers like Car Hop often lure used car buyers onto their car lots with signs that scream:  “No Credit? No Problem!”  “Repo? No Problem!” “Bad Credit? No problem!”

They even promise that if you buy a car from them, and make your payments on time, they will help you restore or improve your credit. That’s one of the major reasons many car buyers shop there.

But all too often,what actually happens is another story.  American’s top consumer financial protection watchdog, the Consumer Financial Protection Bureau, just issued this announcement:

“CFPB Orders CarHop to Pay $6.4 Million Penalty for Jeopardizing Consumers’ Credit

One of Nation’s Biggest “Buy-Here, Pay-Here” Auto Dealers Provided Inaccurate Credit Information

WASHINGTON, D.C. —  Consumer Financial Protection Bureau (CFPB) is taking action against CarHop, one of the country’s biggest “buy-here, pay-here” auto dealers, and its affiliated financing company, Universal Acceptance Corporation, for providing damaging, inaccurate consumer information to credit reporting companies. CarHop and its affiliate also failed to provide accurate, positive credit information that it promised consumers it would supply to the credit reporting companies. The CFPB’s investigation found that the companies inaccurately reported information for more than 84,000 accounts on a widespread and systemic basis. The CFPB is ordering the companies to cease their illegal activities and pay a $6,465,000 civil penalty.

“Many consumers went to CarHop because they needed transportation and wanted to build up a good record of paying their bills,” said CFPB Director Richard Cordray. “But CarHop and Universal Acceptance Corporation thwarted those expectations by inaccurately furnishing negative credit information. The CFPB will not stand for companies whose sloppy actions jeopardize consumers’ credit.”

Minnesota-based CarHop, also known as Interstate Auto Group, is one of the largest buy-here, pay-here auto dealers in the nation. Buy-here, pay-here dealers sell cars and originate and service the auto loan. CarHop has approximately 50 retail locations in approximately 15 states. CarHop sells vehicles primarily to customers with nonexistent or poor credit histories in need of subprime or deep subprime credit. It markets itself as a way for these consumers to rebuild or build-up good credit by saying it will provide positive payment histories to the credit reporting companies. Consumers who buy from CarHop frequently do so because they suffer from poor credit scores and other financial challenges.

Universal Acceptance Corporation, on behalf of CarHop, furnishes consumer account information to all three major consumer reporting companies on a monthly basis. The CFPB found that the company reported information that it knew or had reasonable cause to believe was inaccurate. The company inaccurately furnished information for more than 84,000 accounts from about January 2009 until September 2013. With CarHop, consumers may not have even known about the damage to their credit profiles resulting from the erroneous reporting unless and until they checked their credit reports.

Almost all the information the companies inaccurately furnished to the credit reporting companies could potentially harm customers. The negative information could lower a consumer’s credit score, hamper their ability to obtain other credit, and hurt their job prospects. The CFPB found that CarHop and Universal Acceptance Corporation violated the Fair Credit Reporting Act and the Consumer Financial Protection Act. Specifically, the companies:

  • Deceived consumers into believing they could build up good credit with CarHop: As part of its marketing and sales practices, CarHop represented in writing to consumers that it reports “good credit” to the credit reporting companies. CarHop also emphasized to consumers its part in helping them build and maintain good credit. This appealed to consumers trying to build up their credit profiles with a history of on-time payments. But the company, through Universal Acceptance Corporation, failed to furnish certain positive information, including information that would support “good credit,” for tens of thousands of consumers.
  • Provided inaccurate repossession information: CarHop customers had the right to voluntarily return their vehicles within 72 hours of purchase for a full refund without any penalties or additional obligations. But for some customers who returned their vehicles under this policy, Universal Acceptance Corporation did not accurately report to the credit reporting companies what really happened. Instead, the company inaccurately reported on numerous occasions that the cars had been repossessed or that the consumer still owed money.
  • Incorrectly reported previous customers as still owing money: For consumers 72 hours past purchase, CarHop often resolved disputes by having the customer return the vehicle. It then issued documentation to the customer saying they no longer had any financial obligations and had settled their account. But for hundreds of customers, in the months or even years that followed after they returned their vehicles, Universal Acceptance Corporation inaccurately furnished, on a monthly basis, information that said that the customer still had an outstanding balance. Sometimes, the company inaccurately reported the amount past due in continuously increasing amounts.
  • Failed to have reasonable written policies and procedures to ensure the accuracy of consumers’ credit information: Universal Acceptance Corporation had no written policies and procedures regarding the accuracy and integrity of the consumer information it furnished until early August 2013. The policies it adopted that month were not reasonable or appropriate to the nature, size, complexity, and scope of the company’s activities.

Enforcement Action

Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the CFPB orders released today, CarHop and Universal Acceptance Corporation must:

  • Cease misrepresenting that they will report “good credit”: The companies must not misrepresent to customers that they will report “good credit” or other positive information to the credit reporting companies.
  • Correct credit reporting information: If Universal Acceptance Corporation furnished information to a credit reporting company that it knew or had reasonable cause to believe was inaccurate, it must notify the credit reporting company of the inaccuracy. When it does so, it must either provide corrected information or request that the company delete the wrong information from the consumer’s file if accurate information is not available.
  • Provide credit reports to harmed consumers: CarHop and Universal Acceptance Corporation must, for consumers who had incorrect information furnished about their accounts, arrange for consumers to obtain free credit reports from the credit reporting companies that received the inaccurate information.
  • Implement an audit program to ensure laws are followed: CarHop and Universal Acceptance Corporation must implement a process for auditing information that Universal Acceptance Corporation furnishes to the credit reporting companies on a monthly basis. This process must include monitoring and evaluating the disputes the companies receive. The audit is designed to ensure the integrity and accuracy of the information.
  • Pay a $6,465,000 civil penalty: CarHop and Universal Acceptance Corporation will pay a $6,465,000 penalty to the CFPB’s Civil Penalty Fund.”

The consent order can be found at:


Actions like this one are why consumers all over America are growing to LOVE our consumer watchdog agency, the CFBP. And why car dealers are trying to get special favors from Congress to stop the CFPB from being able to do its job.

Greedy car dealers and lenders are hell-bent on finding ways to keep profiting from the excessive interest charges paid by people who actually deserve to pay less, based on their credit histories.

Consumer protection groups like CARS are fighting back. If you were ripped off by Car Hop, we’d love to hear from you. Here’s where you can contact us:

Plus here are tips for how to get a good deal on a nice, safe used car — without getting scammed by a sleazy car dealer:

With best wishes for safe, happy motoring —









“The financing fell through” — car deals gone bad

It’s a consumer transaction like no other. When you buy any other product or service, once you’ve signed on the dotted line, the seller can’t unilaterally change the deal. But then you set foot on a car dealership lot, and it’s like you’ve entered a parallel universe where suddenly the rules of the road no longer apply.

No other shopping experience in your life prepares you for what auto dealers try to pull. It’s called “yo-yo” financing. It’s a shady practice that has made headlines nationwide, and is becoming notorious, but continues to happen at auto dealerships every day, all across the country.

You negotiate to buy a car. You reach an agreement. You make a deposit and trade in the car you own. You are then sitting across the table from the Finance Manager, who is all smiles and claims to be on your side. He says he’ll get you the “best terms” on a car loan. He shows you the federally required Truth in Lending disclosures. Total amount financed. Monthly payment.  You look it over, it appears to be reasonable, and you sign the Retail Installment Contract. The salesman hands you the car keys, and off you go, in your newly acquired car. Life is good.

But then a week or two later, you get a phone call from the dealership. They say that the financing “fell through.” They want you to go back and sign another contract. On worse terms. The interest rate you agreed to was 4%. Now they want to charge 16%. Or 20%. The monthly payment was a manageable $240.  Now it will shoot up to $480.   They claim that your credit isn’t as good as they thought. Which makes no sense, since they pulled your credit report before financing the car. Given electronic communications, they knew within seconds what rate you qualified to get.

What they’ve done is known as “de-horsing” — a term that harkens back to horse-trading days. Their goal is to get you out of the car you own, and take you out of the market and trap you into a deal with them. Once they have your trade-in and down-payment, chances are good you can’t just go somewhere else and buy a car on better terms.  They have you over a barrel.

If you balk at signing the new contract, they will threaten to report it as stolen.  Or they’ll threaten to repossess the car, and ruin your credit. If you drive back to the dealership in your newly purchased vehicle, they may park cars on both sides and behind it, to block you from being able to leave, until you sign the new contract. Typically, they refuse to return your deposit. They also claim they already sold your traded-in car, even though it’s actually sitting on a back lot.

You feel trapped into signing, even though it will cost you thousands more than you had initially agreed to spend.

This is the twisted world of “yo-yo” financing. The dealers claim that the financing “isn’t final” — even though you reached an agreement and signed a contract.

The ONLY way to make sure you don’t fall into the yo-yo trap: NEVER, EVER get a loan from a car dealer. Always get your own pre-approved loan. And don’t fall for it if the dealer claims it will get you better terms. Because those can change after you drive off the lot.

CARS recently heard from a consumer, Michael L., who was being scammed by a major car dealer in Sacramento. He and his fiancee are expecting their first child in a few months and wanted a bigger car.   Michael had pre-qualified for a loan at around 10%. He had the check, from Capitol One, in hand.  The dealership finance manager promised a lower interest rate. Thinking he could save some money, Michael agreed to go with dealer financing. Then came the phone call — sorry, the loan “wasn’t approved” at the lower rate. The dealer demanded that he pay 18%.  So instead of paying $23,000 for the loan, Michael was going to have to pay over $30,000 to finance the same car.

He contacted CARS and we brought his case to the attention of a major national news organization. When the dealership found out about the potential news coverage, it backed down and Michael got to keep the car on the original terms. He said he’d learned his lesson — never trust a car dealer, especially not on the financing.