Santander Consumer USA disclosed last Wednesday that it had agreed to pay $25.9 million to resolve accusations that the company funded unfair loans to subprime borrowers in two states.
However, the agreement is unlikely to lead to big changes at the company, said Christopher Donat, managing director of equity research at Sandler O’Neill and Partners LP.
“The way the company is characterizing this is that it happened under a prior management team, and so they have changed practices to amend their ways,” Donat told Auto Finance News. Santander first disclosed that it had received subpoenas from Massachusetts and Delaware regulators regarding the securitization of nonprime auto loans back in 2014, and “once you know there is an investigation, there is a risk of a settlement like this,” Donat said.
Since that disclosure, former Chief Executive Thomas Dundon resigned from his position in July 2015 and was replaced by Jason Kulas. Other executive changes have been made since then, including the appointment of Richard Morrin as chief operating officer in February 2016.
“Santander Consumer did things they had to settle for, but the absence of relatively recent developments suggests that they’ve put the pattern behind them,” Donat said. “We’ve gone past the high point of the regulatory attention [in auto finance], and it’s now decreasing a bit.” Santander did not respond to AFN’s request for comment, but said in a public statement that it has taken steps over the past 18 months to strengthen business practices.
