Thousands of New York and Pennsylvania consumers are expected to receive debt relief or restitution under a multistate settlement with subprime auto lender Credit Acceptance Corporation.
The agreement resolves allegations that the company placed borrowers into unaffordable car loans, sometimes with expensive add-on products consumers did not want or were told they needed. Credit Acceptance did not admit wrongdoing in announcing the settlement.
New York Attorney General Letitia James says the agreement will eliminate more than $630 million in debt owed by more than 55,000 consumers nationwide. The company also will pay $60 million in restitution to additional consumers who lost vehicles to repossession and $15.5 million in penalties to participating states.
About 2,500 New Yorkers are covered. The New York attorney general estimates the state's consumers and government will receive about $34 million through debt relief, restitution and penalty payments.
Pennsylvania Attorney General Dave Sunday's office estimates more than $17 million in debt relief for Pennsylvania consumers and about $2.97 million in restitution. Pennsylvania also is due $469,623 under the agreement.
The states alleged Credit Acceptance concealed the true cost of high-interest loans and helped dealers sell unnecessary add-ons. New York's investigation found the average loan carried an annual interest rate above 38 percent, with some rates topping 100 percent.
The settlement also requires changes to the lender's practices. Certain at-risk borrowers whose vehicles are repossessed after default will have 95 percent of the remaining debt forgiven. Credit Acceptance must also contact consumers outside the dealership to explain add-on products and provide a cancellation process.
The agreement is scheduled to take effect November 2. State officials say eligible consumers will be contacted, so borrowers do not need to submit a claim immediately.
