GM Financial follows the rules but consumers feel the pain

GM Financial stopped reporting customer payment information to the credit bureaus after problems following a systemwide technology upgrade, and legally, that was the lender's only choice.

Halting reporting from January through May was meant to ensure no customer's credit was negatively impacted, but customers told the lender -- and Automotive News -- that their credit scores had slid.

Still, GM Financial followed the rules. Under the Fair Credit Reporting Act, it is illegal for lenders to furnish inaccurate information to consumer reporting agencies. Even if some consumer information was not adversely affected by the transition, GM Financial was obligated to halt reporting.

Rather than find out how many customers were impacted, GM Financial reported Code D -- a standard electronic data reporting format the lender says is widely used in the industry to correct and update consumer credit history. Code D indicates that credit reporting ceased, not that the consumer failed to make payments.

"Like all data furnishers, GM Financial has received disputes related to credit reporting and in accordance with its responsibility as a data furnisher, [the lender has] responded to those disputes to ensure customers credit reporting were not adversely impacted," the company wrote in an email to Automotive News.

But before GM Financial could update all affected customers' reports, some were adversely impacted. GM Financial did not conduct an analysis of affected accounts because the requirement to stall payment reporting was meant to preserve all credit scores until the portfolios could be properly updated.

Imagine an illness breaking out in GM Financial's servicing system. Rather than test each customer profile, the lender quarantined all of the profiles until the information could be systematically proved healthy.

Declining credit scores were fixed quickly by the captive, so long as the customer reached out to the company, a GM Financial spokeswoman said. The remedy, for those trying to apply for other loans and mortgages during the suppression, is to manually update the bureaus with customer information.

The Fair Credit Reporting Act prohibits reporting information if there is reason to believe the information is inaccurate. Because of reporting cycles, some customers' credit reporting will not be updated until the end of June. These factors can't be helped, and it appears all involved did their best.

Halting reporting on up to 2.5 million customer profiles was the best move GM Financial could have made from a legal standpoint, but shouldn't the lending sector have a better solution? GM Financial followed the letter of the law, but consumers were still left in the dark.

You can reach Jackie Charniga at jcharniga@crain.com -- Follow Jackie on Twitter: @jccharniga

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