Santander Consumer USA Inc. has reached a $550 million deal with nearly three dozen states to settle charges of predatory auto lending to low-income and subprime borrowers, the Wall Street Journal reported. The settlement, announced yesterday, resolves charges that one of the largest subprime auto lenders in the U.S. made loans borrowers couldn’t afford to repay. The states also claim that Santander failed to monitor dealers that falsified borrowers’ incomes and other information when submitting loan applications. “Over the last several years, we have strengthened our risk management across the board — improving our policies and procedures to identify and prevent dealer misconduct, and tightening standards to ensure affordability,” Santander said in a written statement. Thirty-three states and the District of Columbia accused Santander of extending loans that were too big relative to borrowers’ incomes, charging excessive fees and failing to monitor dealership loan-approval practices. The settlement includes $65 million of restitution for consumers. It also involves some $433 million in loan forgiveness, including for customers who have had cars repossessed but still owe money to Santander. The lender also agreed to waive balances for customers who have very low credit scores and who had stopped paying their loans as of the end of last year.
