The New York Attorney General's Office and Consumer Financial Protection Bureau sued Credit Acceptance Corp. on Wednesday, alleging the Detroit auto lender misled consumers about the affordability and cost of car loans and let dealerships deceive customers.
The agencies alleged single counts of deceptive practices, abusive practices and "substantial assistance" under the U.S. Consumer Financial Protection Act. The substantial assistance count alleges Consumer Acceptance failed to significantly prevent dealerships from misrepresenting finance and insurance products as mandatory and concealing their presence within deals.
"Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics on loans its own systems predicted that borrowers can't afford to repay," CFPB Director Rohit Chopra said in a statement. "The CFPB's action with the New York Attorney General seeks to end Credit Acceptance's unlawful practices and make consumers whole."
Democratic New York Attorney General Letitia James also alleged a single count of fraud and two counts of illegality under New York's Executive Law, a count of securities fraud under the state's Martin Act, and a count of deceptive practices under the state's general business law.
"All I can really say is that Credit Acceptance operates with integrity and in compliance with applicable laws and regulations," Credit Acceptance CFO Doug Busk told Automotive News on Wednesday. "We deny the allegations in the complaint and intend to vigorously defend ourselves in this matter."
Shares in Credit Acceptance plunged 12 percent to close at $403.49 on Wednesday.