Your Car Loan Was Entitled With This $25.9 Million Settlement

Are you a borrower who resides in Delaware or Massachusetts? Did you receive a car loan from Santander Consumer Holdings USA? If so, you may be entitled to part of a $25.9 million settlement from the company for subprime auto loans. The Attorney General reached this agreement with the company this past March and is in the process of providing consumers who qualify with their share of the settlement.

The investigation into the company is due to the many auto loans the company gave out to consumers who they knew could not repay the loan. Many of the loan applications included inflated income information or inaccurate information. Hundreds of borrowers in both Delaware and Massachusetts were given auto loans that the company knew they couldn’t afford to repay. Many lenders even knew that the borrowers were likely to default on the auto loan yet allowed the bank to process the loans anyway. This information is according to The Delaware Department of Justice and was released in a press release by the organization.

Santander did not admit to any wrongdoing. However, they did promise that in the future they will give more care and consideration to the applications when processing them. These statements were made in direct response to the allegations and settlement.

Understanding the Settlement

Consumers who were given an auto loan in Delaware or Massachusetts from Santander may be eligible to receive part of the $25.9 million settlement the company agreed to pay. This cash has been divided into a few parts. In Delaware, there is a trust fund that holds $2.875 million and is currently being distributed to affected consumers. A little more than one million has been placed into the Delaware Consumer Protection Fraud, which is a reputable organization that investigates consumer fraud and other related issues.

In Massachusetts, $16 million has been set aside to repay affected consumers. The state of Massachusetts has received $6 million. Over 2,000 customers in this state received subprime loans from Santander. One specific dealer, according to Attorney General Maura Nealy, often altered loan applications by increasing the income of the applicant by around $45,000 a year, allowing them to get a loan that they wouldn’t be able to repay. Dealers in both states may have practiced this type of income inflation to approve more loans for their company.

Consumers will be contacted by the Attorney General concerning any payment that may be owed to them.

Santander and the Case Against Them

Santander, who is the largest packager of subprime auto loans in the whole country, purchased loans from dealers who provided applications with inaccurate information. Many of these loans were also sold to third-party lenders. After the allegations were settled in court, bank officials actually expressed relief that it was over. They went on to stress that the issue was with how the auto loans were originated and not about the securitization of them. Securitization is the process of converting auto loans into assets that are then sold to third-parties. An auto loans security is known as a bundle of car loans.

According to the Attorney General, Santander allowed loans to be funded for customers that should not have been receiving them in the first place. Many borrowers showed reasonable cause that they would not be able to afford the loan payments on their automobile. Many customers were predicted to default on the loans, but the bank still allowed them to take them out. Some loan applications contained inaccurate information. Even faced with this knowledge the bank still allowed the loans to be packaged and sold many of them to third parties. The company identified some car dealers that were known as “fraud dealers”; dealers that continually sent in applications that were full of incorrect information or applications with inflated income.

Since this investigation, the subprime auto lending business has been under close examination. According to the office of Healy, this settlement is actually just part of a wider investigation into subprime auto lending practices. In 2015, Santander agreed to pay a $3.5 million settlement for funding certain loans with insurance policies that their customers did not request, as well as an additional $5.5 million settlement for similar practices.

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