Misrepresenting the cost of credit and tricking customers into high-cost loans on used cars are charges leveled against a Michigan auto lender by the New York Attorney General and the federal consumer financial protection agency in a lawsuit announced Wednesday.
The Consumer Financial Protection Bureau (CFPB) and the New York Attorney General said their joint lawsuit against Credit Acceptance Corp., of Southfield, Mich., is aimed at ending a practice of targeting borrowers with loans that the firm itself predicts consumers cannot afford to repay.
“The car-buying experience turns into a nightmare for many of Credit Acceptance’s borrowers, who face unaffordable monthly payments, vehicle repossessions, and debt collection lawsuits,” the two agencies said in a release.
They said their joint complaint alleges that, among other things, Credit Acceptance hides costs in loan agreements and “sets consumers up to fail.” Their complaint also alleges, they said, that Credit Acceptance violated New York usury limits and other consumer and investor protection laws.
The lawsuit, the agencies said, seeks to force Credit Acceptance to stop its illegal practices, reimburse harmed consumers, pay back wrongfully earned gains, and pay penalties. Those amount to a civil penalty of $5,000 for each violation of state law to the State of New York and a $1 million per day penalty in which Credit Acceptance allegedly engaged in conduct that violated federal law.
The agencies described the firm as one of the nation’s largest publicly traded auto lenders doing business with a network of more than 12,000 affiliated used-car dealers. They alleged that from Nov. 2, 2015, to April 30, 2021, approximately 1.9 million people obtained used-car loans through Credit Acceptance and its affiliated dealers. In 2020 alone, the agencies asserted, consumers obtained more than $4.9 billion in Credit Acceptance-financed loans – and added that the company’s loans typically carry very high interest rates.