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Santander reaches settlement with states in subprime auto loan probe

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A group of 34 state attorneys general has reached a settlement with Santander Consumer USA over allegedly shady subprime auto loan practices, which could provide consumers with $550 million in relief nationwide, officials announced Tuesday.

The bank allegedly violated consumer protection laws in targeting buyers who were more likely to default for risky loans, according to court papers filed in Manhattan Supreme Court.

Santander agreed to pay $65 million in restitution to subprime consumers — people who don’t have adequate credit scores or histories — who defaulted on loans between Jan. 1, 2010, and Dec. 31, 2019, New York Attorney General Letitia James announced.

New Yorkers will receive $2.77 million of the restitution funds.

Consumers across the US who defaulted on their loans and haven’t yet had their car repossessed as of Dec. 31, 2019, will be given the titles to their vehicles and have the balances on their loans forgiven totaling up to $45 million, James said.

People who had their cars repossessed will also get balance forgiveness up to $433 million — $23.4 million of which will go to New Yorkers, the office said.

Santander has also agreed to help repair consumer credit reports that were damaged by its alleged practices.

Santander will also pay another $7 million to the states and to the settlement administrator who will help give out the restitution payments.

The AGs began an investigation into the company in March 2015 after receiving a large number of consumer complaints, James’ office said.

In addition to pushing the risky loans on applicants likely to default, Santander allegedly turned a blind eye to dealerships that let consumers fudge the numbers on loan applications about their income and expenses, including mortgages and rent costs.

Santander would allegedly confuse and mislead consumers about the costs of partial payments or extensions on their loans, including not informing them that a payment wouldn’t necessarily stop their car from being repossessed, according to the court papers.

Going forward, Santander has agreed to not give loan extensions to people who default and have no more income.

Santander has also agreed to forgive loans for people who default in the future, if their loans were found to be unaffordable at the time of signing.

The bank will no longer allow problem dealerships to waive proof of income and expenses by applicants.

“Santander defrauded desperate consumers by placing them into auto loans the company knew these customers could never afford to pay, resulting in defaults and negative ratings on consumers’ credit reports,” James said in a statement. “This settlement will not only provide much needed relief to struggling New Yorkers, but will ensure Santander’s dishonest behavior is put to an end immediately.”

Santander said in a statement, “SC’s voluntary agreement with the attorneys general resolves a legacy underwriting issue stemming from an investigation that commenced in 2014, and is another key milestone in addressing issues related to that time period.

“We are pleased to put this matter behind us.”

Source: on 2020-05-19 17:35:31

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