By Jonathan Stempel
NEW YORK, Sept 17 (Reuters) - Credit Acceptance Corp agreed to a $710 million settlement with 40 U.S. states and Washington, D.C. to resolve charges it drove thousands of borrowers with low incomes and low credit scores into predatory auto loans it knew they could not afford.
The settlement announced on Thursday also resolves claims that Credit Acceptance, one of the nation's largest subprime auto lenders, helped car dealers push consumers to buy unnecessary add-on products, such
as vehicle service contracts, and insurance that they did not need or were never told about.
Many borrowers ended up defaulting or having their vehicles repossessed, the states said.
Credit Acceptance will forgive $634 million of debt owed by more than 55,000 borrowers who took out loans between November 2015 and November 2025, pay $60 million in restitution to thousands of other borrowers, and pay a $15.5 million penalty, New York Attorney General Letitia James said.
The Southfield, Michigan-based company also agreed to change its lending practices. It will warn borrowers in advance when their loans carry historically high risk of default, waive 95% of sums owed if those borrowers default within 12 or 18 months, and refrain from suing to collect the debt or selling the debt to others.
“CAC preyed on consumers in New York and across the nation with false promises of affordable loans, only to exploit them with outrageous interest rates that ruined their credit and cost them their cars," James said in a statement.
In one alleged instance, Credit Acceptance awarded a $260-a-month loan to a mother of two though she made just $950 per month. The company collected $8,400 from her, and her vehicle was repossessed twice, court papers show.
Credit Acceptance denied wrongdoing in agreeing to settle, court papers show. It did not immediately respond to requests for comment.
Thursday's settlement also resolved a lawsuit in Manhattan federal court that James and the U.S. Consumer Financial Protection Bureau filed against Credit Acceptance in January 2023.
The CFPB withdrew from that case in April 2025, calling it "consistent with principles of justice and fairness." That agency has curtailed much of its enforcement activity during U.S. President Donald Trump's second White House term.
Credit Acceptance shares were down 2.7% at $585.08 in afternoon trading.
(Reporting by Jonathan Stempel in New York;Editing by Rod Nickel and Matthew Lewis)
