- Law firms
- Relevant documents
- Acceptance of a loan for the repayment of US $ 27.2 million for the settlement of claims
- Allegations of violating consumer protection and debt collection laws
- Calculation of the latter in a massive investigation of the subprime car loan market
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(Reuters) – Credit Acceptance Corp, one of the largest US subprime auto lenders, has agreed to pay $ 27.2 million to settle claims by the Massachusetts attorney general that he misled investors and provided borrowers with high interest loans, which, as he knew they would not be able to repay.
Massachusetts Attorney General Maura Healy, who was conducting an industry investigation into loan securitization practices in the subprime market, on Wednesday called village the largest of its kind with a sub-prime auto lender.
Credit Acceptance Corp has found no wrongdoing in the settlement. Neither she nor her attorney James Carroll of Skadden, Arps, Slate, Meagher & Flom responded to requests for comment.
The deal decides claim it was Healy who filed with the Suffolk County Supreme Court in August, which accused the Southfield, Michigan company of violating state laws and regulations on consumer protection and debt collection.
“Thousands of Massachusetts consumers, many of whom are buying cars for the first time, believed that CAC would help them with car loans, but were instead attracted to costly loans, were mired in debt and even lost their cars,” Healy said in a statement.
As part of the settlement, the company will pay $ 27.2 million into an independent trustee-controlled trust that will be used largely to assist clients, as well as debt relief and loan repairs to borrowers.
More than 3,000 borrowers in Massachusetts are expected to be eligible for assistance, Healy’s office said. The settlement also requires the company to change its loan practices.
The lawsuit alleged that Credit Acceptance Corp has funded nearly 4,000 Massachusetts subprime used car loans annually since 2013, totaling $ 458 million.
The company, which generates 92% of its income from finance charges, made these loans at high interest rates to borrowers who struggled to pay them back, resulting in them suffering a ruined loan, losing their cars and down payments, and accumulating an average debt of 9,000. dollars, Healy said. …
The claim resulted in the alleged borrowers being charged with hidden finance charges, which resulted in the loans exceeding the statutory limit of 21% on the loan interest rates; and harassment from collection officers who called them up to eight times a day.
Massachusetts law only allows two debt collection calls per day. The complaint says the company has violated the law more than 1.5 million times in six years.
To finance the loans, Credit Acceptance Corp packaged the loans in securities that were sold to investors. But Healy said that to do this, the company made false and misleading claims about the quality of the loans included in the securities.
The settlement follows several earlier deals made by Healy during his subprime car loan investigation, including a $ 5.5 million deal in 2019 with Exeter Finance on alleged unfair loans and Santander deal for $ 22 million in 2017…
Other regulators, including the Consumer Protection Bureau and the New York City Department of Financial Services, have conducted similar investigations in recent years.
Case – Commonwealth of Massachusetts v. Credit Acceptance Corporation, Suffolk County Supreme Court, no. 2084CV01954.
For Massachusetts: Glenn Kaplan of the Massachusetts Attorney General’s Office
For Credit Acceptance Corporation: James Carroll, Patrick Rydout and Anand Raman of Skadden, Arps, Slate, Meagher & Flom