Santander settlement grants NJ $ 3 million in restitution for auto loans
A national auto loan company will pay New Jersey residents more than $ 2.5 million in restitution after a multi-state investigation into its allegedly predatory lending practices, the state attorney general’s office said Tuesday.
A committee of six states, including New Jersey, investigated whether Santander Consumer USA, one of the nation’s largest subprime auto lenders, routinely failed to require proof of income when reviewing claims. loan applications; offered unaffordable long-term loans; and failed to supervise the conduct of car dealerships, which has led to more loans based on false information, New Jersey Attorney General Gurbir Grewal said in a statement.
Although the company has not admitted guilt in the settlement, Santander has agreed to pay $ 65 million in restitution to some consumers across the country who defaulted on their loans, Grewal said. The company will also donate $ 5 million to 33 states and the District of Columbia, including nearly $ 590,000 to New Jersey.
“With the financial downturn affecting so many consumer credit scores, we will continue to hold companies accountable whose predatory conduct targets New Jersey residents with limited financial options,” Grewal said. “I’m glad that in this case we were able to get financial assistance for so many New Jersey workers.”
The investigation found that Santander’s subprime loans – which target high-risk borrowers and involve high interest rates and long repayment terms – often become unaffordable due to the punitive nature of simple interest, which benefits investors. customers who pay early but are particularly severe with chronic delays, Grewal says.
Despite the high default rate – about half of Santander’s subprime auto loan borrowers defaulted between 2013 and 2015 – the company made money selling the loans in the secondary market, Grewal said. But granting structured loans to fail can violate state and federal laws, he added. And lending money without regard to the borrower’s ability to make the payments made can constitute predatory lending.
The Dallas-based company released a statement on its website on Tuesday, saying it was “happy to leave this case behind.”
“Santander Consumer is fully dedicated to this case, and no additional fees will be levied as part of the settlement,” the statement said, adding that it “fully cooperated” with the investigation.
The settlement also requires Santander to forgive or attempt to redeem a number of loans, which could be worth several hundred million dollars, Grewal said. It also forces the company to make its loans more transparent, prohibits it from processing loan applications from those who cannot afford them, and requires the company to more closely monitor car dealerships who might embellish or falsify information. on the applicant’s income.
“For too long, subprime auto lenders have cornered the most vulnerable consumers with unaffordable loans,” said Paul Rodríguez, acting director of the state’s Consumer Affairs Division. “This regulation represents an important step in the fight against these abuses.”
Steve Janoski covers law enforcement for NorthJersey.com. For unlimited access to the most important news about those who protect your local community, please subscribe or activate your digital account today.