Attorney General James and CFPB Sue Auto Lender for Cheating Thousands of New Yorkers

Attorney General James and CFPB Sue Auto Lender for Cheating Thousands of New Yorkers

Credit Acceptance Corporation pushed Consumers into Unaffordable Credit
and Cut off secret financial deals with car dealers

NEW YORK – New York Attorney General Letitia James and the Consumer Financial Protection Bureau (CFPB) today sued Credit Acceptance Corporation (CAC), one of the nation’s largest subprime auto lenders, for defrauding thousands of low-income New Yorkers. low on high interest cars. loans. The lawsuit alleges that CAC made unaffordable loans to tens of thousands of low-income consumers across the state without regard to their ability to repay their loans in full. CAC misrepresented key terms for loan agreements, including principal and interest amounts, and failed to disclose thousands of dollars in loan fees. In addition, CAC packaged these illegal loans into securities that it sold to investors. These fraudulent lending practices lowered consumers’ credit scores and cost New Yorkers millions of dollars. The lawsuit seeks to end CAC’s abusive and deceptive practices, reform or eliminate CAC’s existing credit agreements, and collect damages for affected consumers.

“CAC claimed to help low-income New Yorkers buy cars, but instead, it drove them straight into debt,” said Attorney General James. “CAC led hard-working New Yorkers to financial ruin by scamming them into unaffordable, high-interest auto loans while cutting back-end deals with dealers to protect their profits. These predatory actions hurt innocent people and left them with mountains of debt. I thank the CFPB for their partnership to stop this harm and protect everyday New Yorkers.”

“Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics for loans that its own systems predicted borrowers could not could afford to pay,” said CFPB Director Rohit Chopra. . “CFPB Action with New York Attorney General Seeks to End Unlawful Credit Acceptance Practices and Makes Consumers Whole.”

CAC is a subprime auto lender that claims to help low-income borrowers with poor or poor credit get approved and improve their credit. An investigation by the Office of the Attorney General (OAG) found that CAC’s lending practices were deceptive and left tens of thousands of New Yorkers with massive debt. The ZAP investigation also found that CAC routinely pushed borrowers to buy vehicles worth far less than their loans. This predatory practice caused many borrowers to lose their vehicles through repossession while still owing thousands of dollars on their loans. CAC attempted to collect those loans through lawsuits, default judgments, debt collection and garnishment. Even borrowers who paid off their CAC loans ended up paying thousands of dollars more in hidden loan fees that CAC and the car dealerships they were affiliated with included in the loan agreements.

The OAG’s investigation found that while CAC’s loan agreements in New York claimed an annual percentage rate (APR) of 22.99 percent or 23.99 percent, CAC actually charged an average of more than 38 percent APR—and in many cases charged more than 100 percent APR. As a result of CAC’s high-interest loans, nearly 90 percent of New York borrowers became delinquent on their loans at some point, often leading to additional fees that added to the cost of their already expensive car loans. . More than half of New York borrowers failed to repay their loans under the terms of their loan agreements, with 44 percent of New York borrowers experiencing repossession at some point.

As an example of CAC’s typical business practices, a consumer who supports two minor children signed up for a CAC loan that required her to pay more than $13,000, even though the dealer only needed $5,614 for sell her the car. After she paid more than $7,600 to CAC, they repossessed her vehicle, sold it at auction, and sued her for more than $7,500.

The suit alleges that CAC predicted, down to the penny, how much money it could extract from borrowers through loan payments, late fees, repossessions and auctions, debt collection and garnishment, without regard to a consumer’s ability to repay the loan. theirs. CAC then offered to share anticipated collections with its associated dealers. Through this practice, CAC ensured that as long as it collected the projected amount, both CAC and the dealer would benefit – even if the borrower ended up in delinquency, default or had the vehicle repossessed.

In addition, the lawsuit alleges that CAC cut deals with its affiliated retailers and assisted them in defrauding consumers by including costly extras in their purchases. Despite receiving repeated complaints that its dealers fraudulently told consumers that these products were required, and that dealers even included the products without the consumer’s consent, the CAC took no action to stop this. Instead, the CAC continued to incentivize its dealers to push these products and actually adopted electronic signature practices that made it easier for dealers to include the products with little or no notice to consumers.

The final step in the CAC fraud was to offload a large portion of the loans to unsuspecting investors by packaging consumer loans into securities. During the origination, marketing and sale of these securities, CAC represented to the initial purchasers, rating agencies and investors who purchased the securities that the underlying loans were in compliance with applicable law. However, these representations were false, and the lawsuit alleges that CAC’s statements constituted securities fraud under New York’s Martin Act.

Through this lawsuit, Attorney General James seeks to stop CAC’s abusive and deceptive practices, reform or rescind CAC’s existing loan agreements, provide restitution to affected New Yorkers, and provide penalties and damages from CAC due to this conduct. unacceptable and illegal.

ZAP encourages New Yorkers who have had negative experiences or feel they have been taken advantage of by CAC or its affiliated merchants to file an online complaint with the Consumer Fraud Bureau.

This litigation is being handled by Assistant Attorney General Christopher L. Filburn of the Bureau of Fraud and Consumer Protection, under the supervision of Bureau Chief Jane M. Azia and Deputy Bureau Chief Laura J. Levine, and by Assistant Attorney General John Ruth, Senior Enforcement Counsel Roger Waldman and Legal Assistant Charmaine Blake of the Bureau of Investor Protection, under the supervision of Bureau Chief Shamiso Maswoswe and Acting Deputy Bureau Chief Kenneth Haim, all with the assistance of data scientist Jasmine McAllister of the Department of Research and Analytics, Director of Research and Analytics Jonathan Werberg, and Deputy Assistant Attorney General in Charge of the Rochester Regional Office Bruce Benjamin. The Bureau of Fraud and Consumer Protection and the Bureau of Investor Protection are part of the Division of Economic Justice, which is headed by Deputy Attorney General Chris D’Angelo and overseen by First Deputy Attorney General Jennifer Levy.

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