Credit Acceptance reaches $710 million predatory auto lending settlement with most US states

Credit Acceptance Corp reached a $710 million settlement with 40 U.S. states and Washington, D.C. to resolve allegations of driving low-income borrowers with low credit scores into predatory auto loans they could not afford. The settlement also addresses claims that Credit Acceptance facilitated car dealers in pushing consumers towards unnecessary add-on products, leading to defaults and repossessions.

The company will forgive $634 million of debt owed by over 55,000 borrowers, pay $60 million in restitution, and $15.5 million in penalties. Credit Acceptance will modify its lending practices, informing borrowers of high-risk loans, waiving most debt for those defaulting early, and refraining from legal actions or debt sales. New York Attorney General Letitia James criticized the lender's exploitative tactics, citing a case where a borrower was offered a $260-a-month loan despite earning only $950 monthly.

Credit Acceptance declined to admit wrongdoing and will not record further charges. The settlement ends a lawsuit in Manhattan federal court and a case brought by the U.S. Consumer Financial Protection Bureau. The company's stock declined by 1.5% following the agreement.