Santander Consumer USA is paying a $1.5 million fine to settle claims by the Securities and Exchange Commission over the lender’s accounting for troubled subprime loans. The SEC charged that for at least eight reporting periods, from 2014 to 2016, Santander Consumer USA failed to calculate and report its credit loss allowance for certain impaired loans in accordance with Generally Accepted Accounting Principles.
Instead, the SEC said, the lender improperly grouped the impaired loans with other assets, and SCUSA’s “flawed internal accounting controls” contributed to the errors that led the lender to restate financial statements. “The errors impacted every periodic report and earnings release filed by SCUSA from the time of its IPO in January 2014 until it filed its second restatement in late 2016. SCUSA’s financial statements contained errors that were material for both quantitative and qualitative factors,” the SEC noted in a Dec. 17 document.
Also, “SCUSA used an incorrect discount rate and made errors in calculating the accretion of that discount, which also impacted its reporting of the impairment of these assets,” the SEC said. Santander agreed to the settlement without admitting or denying the SEC’s claims. SCUSA had a $42.8 billion auto loan portfolio as of Sept. 30. As part of the settlement, the company has agreed to a cease-and-desist order against future violations. “Our voluntary agreement with the [SEC] resolves this inquiry, and we are pleased to put this matter behind us,” a bank spokeswoman wrote in an email to Auto Finance News. “Strengthening our internal controls over our financial statement disclosures and reporting has been a key focus of ours for the last two years, and we continue to make significant progress.”
Richard Gottlieb, a partner in the financial services group at Los-Angeles based law firm Manatt, Phelps & Phillips LLP’s, told AFN that in the scheme of things, the SEC settlement is a “rather insignificant accounting error.”
It comes one month after Santander reached an agreement with the Consumer Financial Protection Bureau to pay a $2.5 million fine and more than $9 million in restitution to resolve allegations that it had misled consumers in regard to loan extensions. Santander agreed to the CFPB settlement without admitting or denying the claims.1 - Reader Likes This Post