Three auto finance companies — Credit Acceptance Corp., Clover Commercial Corp, and Westlake Financial Services — are the first auto lenders targeted by the New York Department of Consumer Affairs as the city ups its enforcement of “predatory financing practices.”
The companies will pay a combined settlement of more than $311,000 in restitution to 50 consumers who were charged interest rates as high as 24.9% across four New York dealerships, according to a press release this week. In May, the Consumer Affairs Department announced that it was seeking restitution from the lenders alongside the issuance of a $1.2 million fine to the dealerships.
Consumers who submit complaints to the agency before March may also be eligible for restitution. The lenders are also to work with the credit bureaus to delete information that may have negatively affected the borrowers’ credit scores.
While the settlement was relatively low — Credit Acceptance holds $4.4 billion in auto loans outstanding while Westlake has a portfolio of $3.1 billion, according to earnings reports and Big Wheels Auto Finance 2017 — it could be the start of increased scrutiny from the city.
In October, Mayor Bill de Blasio signed legislation that is meant to more strictly regulate auto financing in the city’s used-car industry. The new rules go into effect in February and require dealerships to post a “Consumer Bill of Rights” that discloses information about the automobile price and financing terms.
“All three financing companies have agreed to pay restitution to consumers who were burdened with exorbitant interest rates on loans they received through these deceptive dealerships,” said DCA Commissioner Lorelei Salas in a press release. “The city will not tolerate predatory financing and sales practices. We will continue to hold dealerships and financing companies accountable in an effort to protect innocent New Yorkers from purchasing unusable cars and loans that place excessive financial burdens on themselves and their family members.”
Westlake declined to comment while the other two auto lenders could not be reached for comment by press time.