A Santander car loan class action website has been established to inform consumers of a proposed $550 million settlement that they may qualify for.
Though the website is live, the settlement is not accepting claims at this time. A judge has yet to approve the settlement deal. Top Class Actions will provide information on how to file a claim as soon as the details are available.
The $550 million settlement would resolve a probe by 34 state attorneys general into allegations that Santander issues unfair auto loans with excessive interest rates and other terms. These loans were allegedly offered to “subprime” consumers who were highly likely to default on the debts.
“Santander profited by approving high-cost loans to disadvantaged auto buyers who were doomed from the start,” California Attorney General Xavier Becerra said in a statement, according to U.S. News.
“This settlement should be a warning to the industry that we are committed to protecting consumers from abusive business practices.”
According to the multi-state investigation website, Santander knew that some of their borrowers were at a high risk of default but turned a blind eye to these risks and exposed these borrowers to “unnecessarily high levels of risk through high loan-to-value ratios, significant backend fees, and high payment-to-income ratios.”
Santander has agreed to pay $65 million in restitution to the 34 states participating in the investigation. This restitution will compensate certain subprime borrowers who defaulted on Santander auto loans between Jan. 1, 2010 and Dec. 31, 2019.
For Santander car loan borrowers who have not had their cars repossessed despite having the “lowest quality loans,” the company will reportedly allow them to keep their cars and waive any remaining loan balances. In total, these customers will be offered up to $45 million in loan forgiveness.
Loan forgiveness will also be extended to other consumers, according to the Santander car loan settlement website. Certain defaulted consumers will have their deficiency balances waived by the company, with Santander agreeing to provide up to $433 million in immediate loan forgiveness.
Santander’s loans were reportedly packaged into bonds by the company and sold to investors. In 2019 alone, the company issued $8.3 million of these bonds. This is reportedly twice as much as any other subprime auto loan lender.
For loans that Santander has sold, the company will attempt to buy these loans back under the settlement terms. Should the company successfully acquire the loans, they will provide additional deficiency waivers, according to the settlement website.
Going forward, the settlement also requires Santander to change their practices to better serve consumers. The loan company will be required to consider the borrower’s full list of actual monthly debt obligations before extending a Santander car loan.
Additionally, if a consumer has a negative residual income after considering these monthly obligations, Santander will not extend financing.
If Santander loans default in the future, the company will reportedly be required to test these loans to see if the consumer had a negative residual income at the time of the financing origination. This test must account for basic living expenses, according to the settlement terms.
Should the test reveal that the loan was unaffordable to the consumer and the borrower defaulted within a certain period of time, the loan must be forgiven by Santander.
Previously, Santander allegedly allowed problematic third-party dealers, such as those offering vehicle service contracts, to waive documentation requirements for income and expenses.
Going forward, the lender will reportedly stop allowing such exceptions and will be required to monitor dealers for income inflation, expense inflation and power booking.
The final terms of the Santander car loan settlement requires the company to maintain fair policies and procedures for deferments, forbearances, modifications and other collection matters that all employees must follow.
Santander has reportedly been expecting to reach a settlement to resolve the 2015 multi-state probe. As a result, the lender has reportedly set aside funding and made changes in anticipation – meaning that their earnings will not be impacted.
“Over the last several years, we have strengthened our risk management across the board — improving our policies and procedures to identify and prevent dealer misconduct, and tightening standards to ensure affordability,” Santander said in a statement, according to Banking Dive.
The settlement was lead by Illinois Attorney General Raoul. Attorneys general from California, Maryland, New Jersey, Oregon and Washington serve as the settlement’s executive committee. The following states’ attorneys general are also included in the settlement: Arizona, Arkansas, Connecticut, the District of Columbia, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia, and Wyoming.
The Santander loan class action settlement website provides information for Class Members who may quality for benefits. The website explains that Class Members and borrowers should continue paying their auto loans unless they receive information to do otherwise. Class Members who may be eligible for benefits but cannot pay their loans are advised to talk to Santander about possible options available to them.
Not all borrowers who took out an auto loan from Santander are considered to be Class Members. Qualified Class Members are those who were given a certain internal score by Santander. Though Class Members do not know their internal score, they will be given a notice by the settlement administrator informing them that they are considered to be part of the Class.
Class Members who do nothing in light of receiving their notice about the loan settlement, or those who collect benefits will waive their right to pursue independent litigation against Santander over the loan default issue. If a person wishes to retain their right to pursue independent litigation against the company, then they must opt out from the Class. Those Class Members who opt out will not be eligible for benefits from the settlement.
Did you get a Santander auto loan? Was your loan associated with high interest rates? Tell us about your experiences in the comments section below.
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