Alert

March 30, 2017

Santander Settles Massachusetts and Delaware Charges

The attorneys general for Massachusetts and Delaware have settled charges against Santander Consumer USA Holdings Inc. arising from the company's subprime auto financing operations. The AGs had alleged that Santander funded auto loans (both AGs used the term "loans" to refer to what were undoubtedly retail installment contracts) without having a reasonable basis to believe that the borrowers could afford them and knew that the reported incomes used to support credit applications submitted to the company by car dealers were incorrect and often inflated. The Massachusetts AG's Office found that Santander's own internal audit concluded that the company's oversight of auto dealer conduct when making subprime loans was inadequate. Despite identifying a group of dealers that had extremely high default and delinquency rates and other problems, the company continued to fund loans through these dealers. Santander also allegedly identified a group of dealers it called the "fraud dealers," but continued to fund loans through them.

The Delaware settlement requires business reforms by Santander, including procedures to screen loans originated by Delaware dealers to ensure that they comply with Delaware law and meet minimum documentation requirements. Santander also agreed to prospectively identify and repurchase subprime loans sold to third parties that it later determines do not comply with Delaware law.

The Massachusetts settlement requires $16 million in payments to more than 2,000 consumers and a $5 million payment to the state. The Delaware settlement requires Santander to pay $2.875 million into a trust to benefit hundreds of harmed Delaware consumers. Santander will also pay just over $1 million to the Delaware Consumer Protection Fund.

Under the terms of the settlements, Santander neither admitted nor denied either state's allegations.

  Massachusetts AG News Release
  Delaware AG News Release