Santander Fined by California for Alleged Referral Rate Violations
Santander Consumer USA Holdings has agreed to pay $300,000 to settle charges from California regulators over the failure to disclose to consumers that the lender received referral payments from used-car dealer CarMax, according to a new report.
The order concerns auto loans that were arranged on RoadLoans — an online, direct lending unit owned by Santander — between 2011 and 2017. During this period, the bank allegedly referred borrowers to CarMax and received $300,000 per month and $1,000 per car sold, according to an American Banker report.
Failing to disclose a referral arrangement is a violation of California state law.
“Our voluntary agreement with the California Division of Business Oversight resolves a legacy issue, dating back to 2011, related to disclosures in our direct lending program,” a company spokeswoman told Auto Finance News. “We are pleased to put this matter behind us. Santander Consumer USA is committed to treating customers fairly and operating with best-in-class consumer practices.”
“The Consent Order concerns disclosure requirements on direct auto loans by Santander Consumer USA d/b/a Roadloans.com and Helpingloans.com and does not mention CarMax,” a company spokeswoman for CarMax told AFN. “CarMax is committed to integrity and transparency in the car buying process, and provides all mandatory disclosures. CarMax offers no-haggle pricing in all elements of the transaction. CarMax prices are the same for all customers, whether shopping directly with CarMax or referred by another financial institution.”
Santander has been the subject of state and federal regulations over the years. Earlier this year, the bank settled a case with the Connecticut Department of Banking to pay $3 million over allegedly failing to properly calculate the balance owed on repossessed vehicles and improperly charged consumers convenience fees.
The lender also faced claims of discrimination from call center employees, who cited issues with the voice recording and artificial intelligence system named CallMiner that is used to determine incentive pay. The employees claimed that the system did not recognize the voices of women and workers who speak English as a second language, and Santander told AFN in a statement that it was addressing the issue.
