New York AG, fed agency, sue Southfield car loan company over alleged "predatory" practices
The New York Attorney General's office, and the federal Consumer Financial Protection Bureau have sued Credit Acceptance Corp. (CAC) of Southfield, Michigan, in federal district court in New York over alleged predatory loan practices.
The company specializes in car loans for people with bad credit or little credit history. The lawsuit against Credit Acceptance alleges the company relied on predatory practices to trick thousands of low-income New Yorkers into agreeing to high-interest loans with hidden fees.
According to the suit, the hidden fees resulted in consumers paying 38% or more in interest on the loans.
Moreover, the lawsuit claims, Credit Acceptance knew in advance that many of its loan customers did not have the income to repay the loans, but the company still agreed to lend the money, because it would still make money from repossessing the cars, selling them again, and then pursuing the original owners for the remaining balance, which "drove them straight into debt."
“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,” said Consumer Financial Protection Bureau Director Rohit Chopra. “The CFPB's action with the New York Attorney General seeks to end Credit Acceptance's unlawful practices and make consumers whole.”
Credit Acceptance Corp. did not respond to a request for comment on the story.