Acceptance of credit (CACC) settles automatic loan process and pays $ 27.2 million

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Credit acceptance company The CACC finally announces the settlement of the trial with the Attorney General of Massachusetts. In August 2020, AG Maura Healey filed a lawsuit in Suffolk County Superior Court, claiming that accepting credit violated state laws and regulations on consumer protection and debt collection.

It was alleged that Credit Acceptance provided unfair and deceptive auto loans to thousands of consumers in Massachusetts, provided investors with false or misleading information regarding the auto titles they were offering, and engaged in unfair debt collection practices. receivables.

Healey said in a statement: “Thousands of Massachusetts consumers, many of whom are first-time car buyers, have trusted CAC to help them with a car loan, but have instead been drawn to low cost loans. high, got into deeper debt and even lost their vehicles.

By this lawsuit, since 2013, Credit Acceptance has not informed investors that the loan pools that have been consolidated and securitized have been supplemented by higher risk loans despite claiming the opposite to investors.

Additionally, in violation of state law, the company granted high-interest subprime auto loans to borrowers in Massachusetts whom it knew they would not be able to repay.

For this reason, borrowers have had to experience crumbling credit. They lost vehicles and down payments and ended up with an average debt of $ 9,000. In addition, borrowers were subject to hidden finance charges as a result of which the company’s loans exceeded the usury rate cap of 21%.

Notably, the material terms of the lawsuit were disclosed in April 2021, according to which Credit Acceptance agreed to pay $ 27.2 million to resolve the claims. However, the auto lender did not admit any wrongdoing.

The $ 27.2 million will go to a trust overseen by an independent trustee, which will then be used in part to provide relief to customers, as well as to alleviate debt and repair borrowers’ credit.

According to Healey’s office, more than 3,000 Massachusetts borrowers will likely be eligible for relief.

In particular, Healey has a long history of conducting an industry-wide investigation of loan securitization practices in the auto subprime market. In 2017, Santander Consumer USA Holdings Inc. SC has agreed to pay $ 25.9 million to resolve a subprime auto loan investigation by the Attorney General.

Our opinion

While credit acceptance has witnessed a steady increase in expenses as well as a deterioration in credit quality, which is expected to hamper finances, the income of the company is expected to continue to be positively impacted by an increase. finance costs, driven by increased demand for consumer ready products. In addition, an improvement in dealer registrations and active dealers (despite fierce competition) is a positive for the company.

The company’s shares have gained 70.6% so far this year, compared to the 48.1% growth recorded by the industry.

Image source: Zacks Investment Research

Currently, Credit Acceptance sports a Rank 1 of Zacks (Strong Buy).

A few other top-ranked stocks in the financial space are mentioned below.

American National Bankshares Inc. AMNB has witnessed an upward revision of the profit estimate of 11.3% for the current year over the past 60 days. Its share price has risen 30.9% since the start of the year. The company currently sports a Zacks Rank # 1. You can see The full list of today’s Zacks # 1 Rank stocks here.

Bancorp Community Trust, Inc. CTBI currently carries a Zacks Rank # 2 (Buy). Zacks’ consensus estimate for current year earnings has been revised up 9.9% in the past 60 days. Its shares have gained 12.3% since the start of the year.

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Credit Acceptance Corporation (CACC): Free Stock Analysis Report

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American National Bankshares, Inc. (AMNB): Free Stock Analysis Report

Santander Consumer USA Holdings Inc. (SC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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