Information and Alerts

Government Action: BBB reports on known government actions involving business’ marketplace conduct:

CFPB & State of New York vs. Credit Acceptance Corp

The following describes a pending government action that has been formally brought by a government agency but has not yet been resolved. We are providing a summary of the government’s allegations, which have not yet been proven.

On 01/04/23, the Consumer Financial Protection Bureau (CFPB) and New York Attorney General filed a complaint in the U.S. District Court for the Southern District of New York. Charges filed allege Credit Acceptance Corporation (CAC) is in violation of State and Federal laws prohibiting unfair, deceptive, or abusive practices, and violations of state usury limits.

Specifically, the complaint alleges:

• Credit Acceptance Corporation makes predatory loans to millions of financially vulnerable consumers. CAC’s loans carry exorbitant interest rates, are loaded with expensive add-on products, and saddle borrowers with debts that even CAC believes the borrowers often cannot afford to repay in full.
• CAC sets interest rates for affiliated dealers, typically about 22%, but those high rates often don’t reflect how much consumers are really paying for a loan because CAC’s business model pushes dealers to manipulate the prices of vehicles, hiding an additional cost of credit in the principal amount financed by the loan.
• CAC created a complex algorithm to predict how much it will collect from consumers over the life of the loan- not just from monthly payments, but also from potential collection efforts, repossessions, auctions, and deficiency judgments if the consumer defaults. CAC’s lending model is indifferent to a consumers’ ability to repay a loan in full.
• CAC uses projected collections to decide how much to pay its dealers. Dealers are incentivized to add products to consumer loans, like vehicle service contracts, and to sell cars at inflated prices to increase the dealer’s payout. CAC turns a blind eye when dealers hide the add-on products in loan paperwork or fail to disclose to borrowers that add-on products are included in their loan agreements. 90% of CAC loans included a CAC approved add-on product, often adding thousands of dollars to the already inflated principal amounts.
• The true cost of credit is higher than what is disclosed on the CAC loan agreements, so many loans actually exceed state usury caps. In New York, more than 84% of loans exceeded the 25% penal usury cap.

For more information, please see the press release and Complaint. Case# 1:23-cv-00038.