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oalition of 24 State Attorneys General Announces over $550 Million Settlements with Nation's Largest Subprime Autho Financing Company


Settlement with Santander Includes more than $550 Million in Relief for Consumers

A coalition of 34 attorneys general led by Illinois Attorney General Kwame Raoul, announced on May 19, 2020, a settlement with Santander Consumer USA Inc. (Santander) that includes approximately $550 million in relief for consumers with even more relief in additional deficiency waivers expected. The settlement resolves allegations that Santander violated consumer protection laws by exposing subprime consumers to unnecessarily high levels of risk and knowingly placing these consumers into auto loans with a high probability of default.

The May 19th settlement stems from a multistate investigation of Santander’s subprime lending practices. In March 2015, the Illinois Attorney General’s office led the coalition in opening the investigation into the largest subprime auto financing company in the country after receiving an increase in consumer complaints related to subprime auto loans.

Based on the multistate investigation, the coalition alleges that Santander, through its use of sophisticated credit scoring models to forecast default risk, knew that certain segments of its population were predicted to have a high likelihood of default. 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. The coalition also alleges that Santander’s aggressive pursuit of market share led it to underestimate 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. 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.

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

Santander will pay $65 million to the 34 participating states for restitution for certain subprime consumers who defaulted on loans between Jan. 1, 2010 and Dec. 31, 2019. For consumers with the lowest quality loans who defaulted as of December 31, 2019 and have not had their cars repossessed, Santander is required to allow them to keep their car and 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.

Going forward, 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. The test must include an amount for basic living expenses. 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 is barred from requiring dealers to sell ancillary products, such as vehicle service contracts Santander will also implement steps to monitor dealers who engage in income inflation, expense inflation, power booking, and Santander will enact additional documentation requirements for those dealers. Further, whereas Santander previously allowed these problematic dealers to waive documentation requirements on income and expenses, Santander no longer will allow such exceptions. If Santander has to use a default mortgage or rent payment value, the amount input must reasonably reflect the payment value for the geographic location. Finally, Santander will maintain policies and procedures for deferments, forbearances, modifications and other collection matters that all employees must follow.

The states joining in the settlement led by Illinois Attorney General Raoul are the attorneys general of California, Maryland, New Jersey, Oregon and Washington, who comprise the executive committee; as well as the attorneys general of Arizona, Arkansas, Connecticut, the District of Columbia, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia, and Wyoming.

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Published on Jun-24-20


Posted by

I as well have been a victim, I am paying over 39% interest and an ungodly amount of fees intop of my loan. I bought my Kia in Pocatello Idaho. I was told I could refinance in 6 months. I have yet to be able to do so. I am disabled with 1 income. I'd like to be involved in the lawsuit.

Posted by

In March of 2018 I bought a 2015 Chevy Terrain. I ended up with a loan through Santander for 18,787.00. I have made payments on time except when I heard about the lawsuit because I thought for sure I would be part of it. Well I wasn’t so continued making my 459.00 a month payments. Here we are 2023 and still owe 9,100.00. It’s a 79 month term and I’m not even at 50% paid off!! We need to get together and start another Lawsuit! And also sue the dealerships that are letting this prime lending happen!

Posted by

My settlement check which is only for $261 bounced in my account and now my account is negative can somebody explain to me why

Posted by

The Santander law suite is a joke and then some .Santander over sees its own accounts and is denueying consumers who call them out on there accounts being deferred and forgiven on defaulted loans that meet all requirements of the law suite.I've talked to Santander ,I've talk to CA attorney General and to the phone number provided in the law suite to contact.and every single company or person I've talk to about this issues has all pass the buck to the next one claiming none of them over see who's included and qualifys for loan someone is lieing and no releiff is actually has been provided to consumers who Santander and dealerships frauded into these loans.there all in bed cooking the books for each other screwing the consumers frauded once again all for show to vacation on a beach somewhere while were left struggling to pay bills each month but yet these company's keep frauding ,harming ,suffering &health issues all for bennifiting of profit &yet the lawyers are the one who see most the funds consumers are handed out chump change amazing

Posted by

hiya.. my payment went up from $5000 to $8000... i never miss a payment..


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