Originally on CBS 17

May 19, 2020

North Carolina consumers will receive more than $27.6 million in relief thanks to a settlement Attorney General Josh Stein reached with a subprime auto financing company, according to a Tuesday news release.

Santander Consumer USA Inc., which Stein said is the nation’s largest subprime auto financing company, “trapped vulnerable North Carolinians in harmful cycles of debt.”

The settlement includes approximately $550 million in relief for consumers and additional relief through deficiency waivers, Stein said. It stems from a multistate investigation that began in March 2015 into Santander’s lending practices.

The investigation alleges that Santander knew “certain segments of its population were predicted to have a high likelihood of defaulting based on sophisticated credit scoring models,” the release said. “Santander exposed these borrowers to unnecessarily high levels of risk through high loan-to-value ratios, significant backend fees, and high payment-to-income ratios.”

It’s also alleged that Santander, in its pursuit of market share, underestimates “the risk associated with loans by turning a blind eye to dealer abuse and failing to meaningfully monitor dealer behavior to minimize the risk of receiving falsified information, including the amounts specified for consumers’ incomes and expenses,” the release said. “Finally, the coalition alleges that Santander engaged in deceptive servicing practices and actively misled consumers about their rights and risks of partial payments and loan extensions.”

Santander will be required to provide relief to consumers. Moving forward, it will need to factor a consumer’s ability to pay a loan into its underwriting.

Click here for more information on the settlement.