In late 2019, Oklahoma resident Becky Perrin was searching for a used vehicle to run errands and get to doctor appointments when she came across a 2014 Chevrolet Camaro at a local dealership.
To buy the sedan, Perrin, a retired nurse who was 67 at the time and recovering from cancer, had the dealer arrange the financing, as most Americans do when obtaining a loan for a car. The dealer, according to the complaint in a lawsuit Perrin later filed, ultimately secured the loan through Michigan-based Credit Acceptance Corporation, which primarily caters to consumers with low credit scores.
But the cost of the loan—which had a 20 percent annual percentage rate and a monthly payment of $388—turned out to be more than she says she agreed to and more than she could afford, and Perrin quickly fell behind on her payments. Soon after, Credit Acceptance repossessed the Camaro, forcing her to depend on friends and family for rides.
Perrin’s story is hardly unique, says Kathi Rawls, an attorney who represented her in the recent lawsuit against Credit Acceptance.
Rawls declined to comment specifically on Perrin’s case, which was settled in October. But she says, “Lenders often know that their customers won’t be able to afford the loans they are given but agree to let them purchase them from car dealerships anyway.” That’s because, she says, lenders know that even when borrowers default, they can make money in other ways.
Indeed, both Credit Acceptance and Texas-based Santander Consumer USA—its main competitor in the subprime auto lending industry—have been accused by two state attorneys general in recent years of violating laws that prohibit “unfair or deceptive” business practices by writing loans they know are destined to fail, and by exposing borrowers to unnecessarily high levels of risk.
Moreover, even when Santander and Credit Acceptance have a borrower who defaults, they still manage to make a profit, the state attorneys general in Mississippi and Massachusetts have alleged in lawsuits filed against the lenders, using a variety of tools to “squeeze as much money out of delinquent borrowers as possible,” as one put it. (Santander and Credit Acceptance reached settlements in those cases, neither admitting nor denying wrongdoing.)….ReadMore…
