Washington, D.C. – Attorney General Brian L. Schwalb announced that the District has joined a multi‑state settlement with Michigan‑based Credit Acceptance Corporation, a major sub‑prime auto finance company. The agreement, valued at $694 million, includes more than $250,000 in restitution for D.C. consumers who were given loans they could not afford.
Key components of the settlement
Under the deal, Credit Acceptance will pay the District over $130,000 in penalties and legal fees, and D.C. residents who qualify will receive direct cash restitution. The settlement also mandates $388 million in debt relief for borrowers whose vehicles were repossessed and $246 million for those who still retain their cars, allowing them to keep the vehicles.
The protections apply to loans made between Nov. 1, 2015 and Nov. 30, 2025. For high‑risk loans that default quickly, consumers will be eligible for up to 95% debt relief, and the company will be barred from filing collection lawsuits on those accounts.
Consumer‑impact statements
“Access to a vehicle can determine whether families can get to work, take children to school, and maintain financial stability,” said New Jersey Attorney General Jennifer Davenport. “When car payments become unaffordable, that stability turns into a spiral of debt and financial distress.”
Connecticut Attorney General William Tong added, “Credit Acceptance profited off risky loans destined to fail, padded with worthless services and so‑called protections. Their irresponsible business practices and ruthless repossession and collection practices destroyed consumer finances.”
Allegations and company response
State attorneys general allege that Credit Acceptance used a proprietary scoring system to predict loan performance and still approved loans when the model indicated borrowers would not be able to repay the principal or interest. The company allegedly allowed dealers to inflate financing agreements with hidden add‑ons such as vehicle service contracts and Guaranteed Asset Protection (GAP) products, often without clear disclosure to consumers.
Credit Acceptance did not admit wrongdoing. The company said the settlement resolves a multistate investigation that began in 2020 and provides greater clarity on regulatory expectations, noting that the agreement “does not require material changes” to its operations.
New consumer safeguards
Going forward, Credit Acceptance must provide clear pre‑purchase disclosures about loan risk and vehicle value, cap vehicle prices at 109% of retail book value for certain borrowers, and establish procedures that make it easier for consumers to cancel optional products. The company must also strengthen monitoring of dealers to prevent undisclosed price increases based on a borrower’s creditworthiness.
For the next seven years, the firm will be prohibited from filing collection lawsuits on qualifying high‑risk loans and must cap vehicle pricing, ensuring that consumers are not overcharged simply because of a low credit score.
How consumers can claim relief
A claims administrator will contact eligible D.C. residents directly. Credit Acceptance will also notify customers who qualify for debt relief. Schwalb emphasized that the settlement returns money to District residents while imposing protections to prevent similar predatory lending practices in the future.
“This resolution puts hundreds of thousands of dollars back into the pockets of DC residents who were taken advantage of,” Schwalb said, “and requires Credit Acceptance to change its business model to make sure customers are protected moving forward.”
Original reporting: The Washington Informer — read the source article.
