Santander pays up $2.8 million for sub-prime auto loans
Santander Consumer USA Holdings, Inc. will pay up to $2.875 million to Delaware consumers for funding bad auto loans.
The settlement came after an investigation by the Delaware and Massachusetts attorney general offices into the financing and securitization of sub-prime auto loans. The investigation revealed that Santander had provided loans without evidence consumers could pay them back and even predicted many would default.
In addition, Santander continued to work with certain car dealerships even after it learned of high default rates, inaccurate information, and inflated income reporting. These types of loans are made through contracts between lenders and dealerships and depend on the accurate sharing of information.
“Protecting consumers from unfair lending practices is extremely important and has been a priority for our office,” said Attorney General Matt Denn in a statement. “We are pleased that this settlement results in significant consumer relief and provisions that will prevent similar misconduct in the future.”
The $2.875 million will go into a trust for the benefit of consumers hurt by the loans. Those eligible will be contacted.
As for Santander, the settlement requires that the company reform some of its lending practices. It now has to screen all loans from Delaware dealers to ensure they are in compliance with the law, and it can’t work with “high risk” dealers who have provided bad information.
The rest of the sub-prime auto loan industry, meanwhile, continues to suffer. A report by Fitch Ratings found that lenders fared worse in the second half of 2016 than the same period in 2015.