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Several Hertz customers have come forward, saying they were arrested or jailed for theft of cars even though they had returned their rental vehicles and paid for them in full
Hertz said it will pay $168m (£137.4m) to customers who were wrongly accused by the rental company of vehicle theft.
The pay-out will settle 364 claims against the company, some from innocent customers who were falsely reported to the authorities for stealing rental cars, Hertz announced on Monday.
Some customers said they were arrested or jailed over the accusations.
In a statement, Hertz CEO Stephen Scherr said his company "will not always be perfect".
"My intention is to lead a company that puts the customer first," Mr Scherr said. "In resolving these claims, we are holding ourselves to that objective."
Reports of the false theft claims first emerged in February, when a Colorado man told CBS News, the BBC's US partner, he was arrested at an airport after Hertz wrongly reported to police that he failed to return a car in Georgia - a state he has never been to.
The man, Drew Seaser, added he has never rented a car from Hertz. Despite this, he was jailed for more than 24 hours following his arrest.
"I was terrified," Mr Seaser told CBS in February. "I still don't sleep well, my life will never be the same after that day."
Others have also spoken out about being arrested and charged for accusations of car theft from Hertz. In many cases, the customers said they had returned the cars they were accused of stealing and had paid for them in full.
"I am one of their best customers. And here I am sitting in jail," Charles Doucette told CBS News in February following his arrest.
It is unclear if Mr Doucette or Mr Seaser are part of the settlement announced by Hertz this week, which the company said will resolve more than 95% of its pending claims related to accusations of false theft reports.
In an April interview with CNBC, Mr Scherr, who has held the company's top position since February, blamed the false reports on a glitch in the company's systems and said he was working to fix it,
The company revealed in court documents earlier this year that it files around 3,400 police reports annually charging customers with car theft, though it is unclear how many of those reports are false.
The company said it expects to pay the full amount of the settlement by the end of the year, and added it believes it will recover a "meaningful portion" of the money from its insurance carriers.
English (US)