State AG announces more than $550M settlement with subprime auto lender

Affected Arkansans to receive $30M in direct payments, debt relief

Arkansas Attorney General Leslie Rutledge announced Tuesday a settlement with Santander Consumer USA Inc. that includes approximately $550 million in relief for consumers, with more relief in additional deficiency waivers expected.

The settlement resolves an investigation conducted by a coalition of 34 attorneys general into allegations that Santander violated consumer protection laws by knowingly placing subprime consumers into high-risk auto loans who had a great probability of default. This settlement, filed in Pulaski County Circuit Court, provides close to $30 million in direct payments and debt relief for over 13,000 Arkansas consumers harmed by Santander’s illegal conduct.

“Santander’s predatory actions targeted Arkansans for high risk auto loans, and now it will pay handsomely for its deceptive practices,” Rutledge said. “The standards set by this settlement should serve as a warning to other bad actors who take advantage of financially vulnerable Arkansans: we will do the fighting for consumers and there will be severe consequences for illegal actions.”

A coalition of states began investigating Santander in March 2015. Following the investigation, the states determined that Santander, the largest subprime auto financing company in the country, used credit-scoring models designed to target consumers who were likely to default and subsequently failed to acknowledge dealer-falsified income amounts on consumer loan applications.

Under the settlement, Santander will pay $65 million to the states for consumer restitution and will waive up to $433 million for consumers who still owe on their loans.

For Arkansas, there are 10,837 Arkansas consumers who are eligible to submit a claim to receive a direct restitution payment of $224.84 each, which totals $2,436,611.87 if all who are eligible submit claims. Additionally, there are 1,288 loans to Arkansas consumers in default that qualify under this settlement owned by Santander for which Santander will immediately waive the deficiency balance, totaling $15,966.00 in debt forgiveness.

There are another 1,336 defaulted loans to Arkansas consumers for which Santander will attempt to buy back and then waive the deficiency balance, which could potentially forgive an additional $10,814,000 in debt relief. Overall, approximately 13,461 affected Arkansas consumers will receive or be eligible to receive restitution in the form of direct payments or debt forgiveness potentially totaling $29,216,611.90. Additionally, Santander will pay $30,000 to the state.

Among the modifications to its business practices required under the settlement, Santander will cease extending loans to consumers with negative available incomes and will monitor loan applications for false income reporting. Santander will also cease from requiring its dealers to sell vehicle service contracts and other products and will maintain policies and procedures for deferments, forbearances, modifications and other collection matters.

Joining Rutledge in the settlement led by Illinois Attorney General are the attorneys general of Arizona, California, Connecticut, the District of Columbia, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia and Wyoming.

Rutledge urges anyone affected by Santander or has a consumer complaint to visit ArkansasAG.gov or call (800) 482-8982.