You May Be Entitled to a Share of Santander's $25.9-Million Auto Loan Settlement

If you live in Delaware or Massachusetts and previously received an auto loan from Santander Consumer Holdings, you may be entitled to a cash settlement. In early 2017, Santander reached a settlement agreement with the Massachusetts and Delaware Attorney Generals' Offices over the company's questionable lending practices.

As one of the country's major subprime lenders, Santander was accused of knowingly making auto loans available to car buyers who would most likely have no chance of paying the loan back. In fact, the Delaware Department of Justice specifically noted that the company itself predicted that a large percentage of its customers would default on their loans. Furthermore, the company also failed to properly screen its loan applications as otherwise it would have become immediately apparent that many applicants lied about or exaggerated their income levels. Although Santander has not admitted to any wrongdoing, the settlement still ensures that the company is held accountable for the financial damage caused by its questionable lending practices. In addition to agreeing to pay out a total settlement of $25.9 million, Santander was also forced to agree to evaluate and make improvements to its loan-screening and approval processes in order to prevent a similar event from occurring in the future.

Terms of the Settlement

In reaching the settlement with the two states, Santander agreed to pay out $25.9 million in penalties. If you live in either Massachusetts or Delaware and have a Santander auto loan, there is a high chance that you could be entitled to a portion of this settlement. However, the total amount you could expect to receive depends on a number of different circumstances.

There are actually two separate settlements, one with each state. Of the two, the Massachusetts settlement is by far the bigger. In this state, the company agreed to pay $16 million in damages to affected customers. As well, the company also must pay an additional $6 million to the state itself.

The settlement agreement Santander reached in Delaware is slightly different and quite a bit smaller. In this state, the company agreed to pay a total of $2.875 million that is to be put into a trust fund for the affected customers. In addition, the company will also pay just over $1 million directly to the Delaware Consumer Protection Fund in order to support the state's efforts to better investigate potential consumer fraud.

The main reason for the different amounts Santander must pay in each state primarily has to do with the total number of affected customers in the respective states. In this sense, only a handful of consumers in Delaware were affected, whereas well over 2,000 Massachusetts residents were affected by Santander's sub-prime lending practices.

The Case Against Santander

The investigations against Santander were spurred on by claims that the company purchased auto loans from car dealerships despite the fact that they were aware that the loan applications contained inaccurate information and misrepresented the applicants' income levels. In addition, the company also then sold off some of the questionable loans to other third-party companies without notifying them of the potential inaccuracies.

According to Massachusetts Attorney General Maura Healy, the state concluded that Santander issued loans without having any reasonable belief that the borrowers would ever be able to pay them back. Instead, Santander actually predicted that many of the borrowers would eventually default on their loans. Even with knowing this, the bank then packaged up these sub-prime auto loans and sold them off.

The investigation also centered on whether Santander knew about inaccurate data in many of the loan applications. Court records show that the bank should have easily been able to spot which car dealers used inaccurate data in their loan applications due to the higher-than-average default rates. However, despite these high default rates, the bank continued to buy loans from these high-risk dealers. This includes a group of car dealers that the bank itself identified as 'fraud dealer.' Yet, even after identifying them as fraud dealers, the bank continued to purchase loans from each of them.

For all of these reasons, it seems apparent that Santander knowingly did wrong. Luckily, the settlements show that governments are finally starting to take the issue of sub-prime lending seriously in an effort to prevent another financial catastrophe.

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