Steve Eisman, the Neuberger Berman Group portfolio manager made famous by successfully wagering against subprime loans a decade ago, said his biggest short now is auto lender Credit Acceptance Corp. because he expects the company to face a crackdown from regulators.
“This is not a short thinking that the company is going to suffer credit losses,” Eisman said Friday on Bloomberg Television. “It has nothing to do with it. This is a pure regulatory story.”
Shares of Credit Acceptance tumbled in the wake of Bloomberg’s reporting, dropping 5.1% to $328.10 at 2:58 p.m. in New York.
Credit Acceptance is battling a lawsuit filed last year by Massachusetts Attorney General Maura Healey alleging it made deceptive loans, misled investors and engaged in unfair collection practices. The company, one of the nation’s largest subprime auto lenders, has denied the allegations.
“The complaint is an unbelievable document, incredibly detailed, providing a litany of predatory lending practices — the only way to describe it is disgusting,” said Eisman, whose subprime bets leading up to the 2008 financial crisis were chronicled in “The Big Short,” the book by Michael Lewis that spawned a movie. “There is a potential here for this company to be regulated to a much, much lower level of profitability at the very least.”
A representative for the Southfield, Michigan-based Credit Acceptance didn’t respond to a request for comment on Eisman’s remarks.
Edwin Groshans of Height Capital Markets told clients this month that auto lenders are due to receive increased scrutiny from regulators in President Joe Biden’s administration. He said Rohit Chopra, Biden’s pick to lead the Consumer Financial Protection Bureau, is a particularly negative development for companies such as Credit Acceptance.
–By Shahien Nasiripour (Bloomberg)