Subprime auto lender Exeter Finance has agreed to pay more than $6 million in two states for financing auto loans that the lender knew or should have known were unfair. Both states say the loans violated state law.
The settlements in Massachusetts and Delaware resulted from a joint investigation by the states' attorneys general offices, the offices said in separate statements Monday.
In Massachusetts, Exeter agreed to pay $4.7 million to harmed borrowers and $825,000 to the state. In a separate cease and desist agreement in Delaware, Exeter agreed to pay $550,000 to affected customers and $50,000 to the state.
The office of Massachusetts Attorney General Maura Healey said Monday that Exeter facilitated auto loan originations that it "knew or should have known were unfair and in violation of the state Consumer Protection Law," while the office of Delaware Attorney General Kathleen Jennings said the lender "knew or should have known" that the loans violated state laws.
Financing is illegal if lenders do not have a basis for believing that customers will be able to repay loans as scheduled, the Massachusetts attorney general office said in a statement.
"This company's loans put Massachusetts car buyers in economic danger," Healey said in the statement.
An Exeter spokeswoman told Automotive News the company is "pleased to have resolved this matter."
"Exeter is committed to ensuring the highest standards of customer service in its business when delivering vital auto financing options to consumers," she added.
Both attorneys general said their offices will continue to investigate subprime lenders to protect borrowers in their states.
In its statement, the Massachusetts attorney general's office also accused Exeter of violating debt collection regulations through mishandling servicing and collection of auto loans.