In order to settle allegations of misguiding consumers by not disclosing certain essential stipulations of auto loans and insurance policies, Santander Consumer USA Holdings Inc. SC agreed to pay a fine of $11.8 million. The news was first reported by Reuters.
Per the settlement reached with the Consumer Financial Protection Bureau (CFPB), Santander Consumer will pay $2.5 million as fine and $9.3 million in restitution to the auto loan borrowers.
However, the company, which is a unit of Banco Santander, S.A., did not accept wrongdoing. It stated, “We are pleased to put this matter behind us. Strengthening compliance and consumer practices has been a key focus of ours.”
Details of the settlement were disclosed in August by Reuters.
Notably, Santander Consumer offers a ‘Temporary Reduction in Payment Plan’ (TRIPP) option to its consumers, per which customers are allowed to pay lower monthly installments for a certain period of time. But, according to the CFPB, the company failed to reveal that such installments will comprise only the interest part and in hindsight, will actually increase the tenure and total cost of the loan for borrowers.
Further, for its "guaranteed auto protection" (GAP) insurance policy, the company failed to reveal that it will not accept claims for car-replacement costs in certain accident cases. Moreover, the insurer did not state that there was a limit on the total claimable amount.
Notably, Santander Consumer stated that it discontinued this insurance policy last year.
Per management, Santander Consumer has been trying to enforce strong consumer protection norms within its organization and keeping a check to ensure complete disclosures for its various plans.
Notably, in a separate statement last year, state officials in Massachusetts and Delaware fined the lender with $26 million. Thus, this $11.8 million fine from the CFPB is less than half of that amount.
Shares of Santander Consumer have gained 9.6% over the past year against the 7.4% fall recorded by the industry it belongs to.
Currently, Santander Consumer carries a Zacks Rank #3 (Hold).
Stocks to Consider
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