Credit Acceptance fraudulently gave loans at high interest rates
2023.01.04 13:40
Credit Acceptance fraudulently gave loans at high interest rates
Budrigannews.com – The Consumer Financial Protection Bureau of the United States and New York Attorney General Letitia James filed a lawsuit against Credit Acceptance Corp. on Wednesday, claiming that the auto lender engages in predatory lending by conning borrowers with low incomes into taking out high-interest used car loans that they cannot afford.
The controllers said Credit Acknowledgment (NASDAQ:) ” sets consumers up for failure” by charging interest rates of up to 22% and entering into agreements with dealers that cover up the true cost of borrowing and sometimes go against state usury laws, both of which are outrageous.
In afternoon trading, Credit Acceptance shares were down 13.3% to $395.93.
Requests for clarification were not immediately met.
The period from November 2015 to April 2021, when an estimated 1.9 million customers obtained loans from Credit Acceptance, is the subject of Wednesday’s lawsuit in Manhattan federal court.
The complaint says that Credit Acceptance uses an algorithm to predict how much it can get from car buyers, including from repossessions after defaults, without considering whether the buyers can afford its loans.
According to the complaint, the Southfield, Michigan-based company also encourages dealers to add products like vehicle service contracts without disclosing them in loan agreements. These products frequently increase borrowers’ debt by thousands of dollars.
According to a statement released by CFPB Director Rohit Chopra, “Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics on loans its own systems predicted that borrowers can’t afford to repay.”
For breaking federal consumer protection laws, civil penalties of at least $1 million per day are sought in the lawsuit. Additionally, it seeks restitution and the resolution of problematic loan agreements.
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