Wyoming Attorney General Announces Settlement with Nation’s Largest Subprime Auto Financing Company

AG 5-20-20

Attorney General Hill, along with a coalition of 34 attorneys general, today
announced a settlement with Santander Consumer USA Inc. (Santander) that requires the company to modify its business practices and provide Wyoming consumers with $160,312 in restitution payments
and at least $1,068,000 in loan forgiveness.

Today’s settlement stems from a multistate investigation of Santander’s subprime lending practices. Last year, Wyoming joined its independent investigation into Santander with the multistate effort. Based on that multistate investigation, the coalition of attorneys general alleges that Santander violated consumer protection laws by exposing subprime consumers to unnecessarily high levels of risk and knowingly placing borrowers into auto loans when Santander knew that the borrowers had a high likelihood of default. The coalition also alleges that Santander turned a blind eye to dealer abuse and engaged in deceptive servicing practices by actively misleading consumers about their rights and the risks of partial payments and loan extensions.

Under the multistate settlement, Santander must provide relief to consumers and, moving forward, must factor a consumer’s ability to pay the loan into its underwriting.

Consumer Relief
In total, under the settlement announced today, Santander will pay $65 million in restitution to certain consumers who defaulted on their loans between January 1, 2010 and December 31, 2019. For some consumers who defaulted on the lowest quality loans, but have not had their cars
repossessed, Santander will allow them to keep their vehicles and will waive any loan balance, up to a total value of $45 million in loan forgiveness. Santander will also pay up to $2 million for the settlement administrator who will administer restitution claims, and pay an additional $5 million to the states.

The settlement also includes significant consumer relief by way of loan forgiveness. In all, Santander has agreed to waive the deficiency balances for certain defaulted consumers, with approximately $433 million in immediate forgiveness of loans still owned by Santander, and additional deficiency waivers of loans that Santander no longer owns but is required to attempt to buy back. Nationwide, the settlement is valued at
$550 million.

A claims administrator will notify those Wyomingites who are eligible for restitution. To learn more about available relief, consumers should visit http://www.santandermultistateagsettlement.com/. More information will be posted to that website as the settlement administration process unfolds.

Changes to Lending Practices

In addition to securing monetary relief, the settlement requires Santander to improve its lending practices. For instance, Santander cannot extend financing if a consumer has a negative residual income after taking into consideration a list of actual monthly debt obligations. Additionally, Santander is required to test all loans that default in the future to see if the consumer, at the time of origination, had a negative income. If the loan is found to be unaffordable and the consumer defaulted within a certain amount of time, Santander is required to forgive that loan.

Santander will also implement steps to monitor dealers who engage in income inflation, expense inflation, and power booking. While Santander previously allowed these problematic dealers to waive documentation requirements on income and expenses, Santander no longer will allow such exceptions. Finally, Santander will maintain policies and procedures for deferments, forbearances, modifications and other collection matters that all employees must follow.

About Us
The Consumer Protection Unit of the Wyoming Attorney General’s Office aims to educate Wyoming consumers and enforce Wyoming’s Consumer Protection Act. To obtain the latest information about consumer issues, Wyomingites should visit the Consumer Protection Unit’s website
(ag.wyo.gov/cpu), or connect with the Consumer Protection Unit on Facebook (facebook.com/WYCPU) or Twitter (@WYCPU).

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