The Consumer Financial Protection Bureau (CFPB) and the New York State Office of the Attorney General took legal action against auto lender Credit Acceptance Corporation.
The two government entities sued the company for misrepresenting the cost of credit and allegedly fooling its customers into high-cost loans on used cars. This leads to unaffordable monthly payments, vehicle repossessions, and debt collection lawsuits.
The joint complaint alleges that Credit Acceptance violated New York usury limits and other consumer and investor protection laws. The lawsuit seeks to force Credit Acceptance to stop its illegal practices, reimburse harmed consumers, pay back wrongfully earned gains, and pay a penalty.
“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 on loans its own systems predicted that borrowers can’t afford to repay,” CFPB Director Rohit Chopra said. “The CFPB and the New York Attorney General seek to halt Credit Acceptance’s illegal practices and make consumers whole.”
Credit Acceptance is an indirect auto lender based in Southfield, Mich. It funds and services used-car loans for people with low credit scores. It is one of the country’s largest publicly traded auto lenders and does business with a network of more than 12,000 affiliated used-car dealers. Roughly 1.9 million people obtained used car loans through Credit Acceptance and its affiliated dealers from Nov. 2, 2015, to April 30, 2021. In 2020, consumers obtained more than $4.9 billion in Credit Acceptance-financed loans.
“CAC claimed to help low-income New Yorkers purchase cars, but instead, drove them straight into debt,” New York Attorney General Letitia James said. “CAC steered hardworking New Yorkers onto a path of financial ruin by tricking them into unaffordable, high-interest auto loans while cutting backroom deals with dealers to increase their own 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.”
Last year, the Massachusetts Attorney General took action against the company, securing more than $27 million for thousands of families.