Credit Acceptance Corporation
On January 4, 2023, the Bureau and New York Attorney General Letitia James filed a joint lawsuit in the United States District Court for the Southern District of New York against Credit Acceptance Corporation, an indirect auto lender that funds and services car loans for subprime and deep-subprime consumers. Credit Acceptance is one of the country’s largest publicly traded auto lenders, doing business with a network of more than 12,000 affiliated used-car dealers. The joint complaint alleges that Credit Acceptance pushes dealers to sell cars with hidden interest costs and surreptitiously include expensive add-on products with vehicle sales. The complaint further alleges that Credit Acceptance applies complicated algorithms to predict how much it is likely to collect from borrowers to determine how much to offer dealers for each loan, resulting in high-cost loans—with annual percentage rates (APR) often exceeding state usury caps—made without regard for borrowers’ ability to repay, while still yielding profits for Credit Acceptance. A significant number of Credit Acceptance’s most credit-constrained borrowers become delinquent on their loans within the first year, and many also lose their cars to repossession and auction or suffer other negative effects from the loans. The joint complaint alleges that Credit Acceptance is engaging in deceptive acts or practices in violation of the Consumer Financial Protection Act of 2010 by misrepresenting key loan terms, including the true principal, finance charge, and APR. The joint complaint further alleges that Credit Acceptance is engaging in abusive acts or practices by taking unreasonable advantage of consumers’ lack of understanding of the risk of default and the severity of the consequences associated with its loans, and taking unreasonable advantage of consumers’ inability to protect their interests in selecting or using Credit Acceptance’s loans. The joint complaint also alleges that Credit Acceptance substantially assists dealers in the deceptive sale of add-on products. The complaint seeks permanent injunctive relief, damages, and civil money penalties.