Nearly a year after speculation of a possible consent order surfaced, Santander Consumer USA is close to settling allegations by the Consumer Financial Protection Bureau that it misled consumers about costs of certain loans and the coverage of ancillary insurance products, according to Reuters.
Specifically, the subprime lender was accused in November 2017 of allowing borrowers to make interest-only monthly payments without explaining that this type of payment increases the total cost of the loan.
The CFPB also claimed that Santander failed to accurately explain to consumers guaranteed asset protection (GAP) policies. The lender allegedly neglected to inform consumers that GAP does not always cover the costs of replacing a car that’s destroyed in an accident.
“While we cannot comment on conversations with our regulators, Santander Consumer is committed to robust compliance and consumer practices,” a company spokeswoman told AFN. “We regularly review all of our practices, including consumer disclosures and call scripts, to ensure that the terms and conditions of our products and services are fair and appropriately disclosed.”
The Bureau was expected to levy a lawsuit against the lender in November 2017 in the waning days of former CFPB Director Richard Cordray’s tenure. However, as Mick Mulvaney took reigns of the agency from Leandra English — Cordray’s hand-picked temporary successor — the consent order never came.
Santander Consumer USA, which has $41.1 billion in assets, has agreed to pay a fine — though the amount was not disclosed.
Santander has run into trouble with regulators in the past. In February 2015, the company settled a $9.35 million suit with the Justice Department for violating the Servicemembers Civil Relief Act by improperly repossessing cars of active and retired military servicemen and woman. The bank also started getting hit with consent orders from the Fed for failure to pass its stress test that same year.
However, the company has been able to put a series of regulatory compliance issues behind them in 2018. Earlier this month, the Federal Reserve Bank of Boston released Santander from regulatory restrictions imposed in a written agreement in July 2015, according to a press release by the Fed on August 17. This week the lender’s parent bank was also released from a consent order issued by the Office of the Comptroller of the Currency.
Santander has also taken steps toward compliance revival since its troubles in 2015.
