Auto Loan giant settles to pay over $2.9 million to Kansans

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TOPEKA, Kan. (WIBW) -- Kansas has reached a settlement with Santander Consumer USA Inc. with relief for Kansans with up to $1.6 million possible announced Attorney General Derek Schmidt.

The settlement requires the nation’s largest subprime auto financing company to pay approximately $2.9 million to Kansas customers.

The settlement involved Kansas and 33 other states and resolved allegations that Santander violated consumer protection laws. Santander was accused of exposing members to unnecessarily high levels of risk and knowingly placing these consumers into auto loans with a high probability of default.

The settlement was the result of a multistate investigation of the company’s lending practices and was opened by the coalition of attorney generals in March 2015 prior to receiving an increase in customer complaints related to the auto loans.

Based on the investigation, the attorneys general say that Santander knew that certain groups of its consumer population were predicted to have a high likelihood of default through its use of sophisticated credit scoring models.

Santander exposed these customers to unnecessarily high levels of risk through high loan-to-value ratios, outrageous backend fees and high payment-to-income ratios.

The attorneys general also allege that Santander’s aggressive pursuit of customers led to the underestimate of risk associated with the loans and turned a blind eye to dealer abuse which resulted in failing to monitor dealer behavior and minimize the risk of receiving falsified information.

Lastly the attorneys general brought up allegations of deceptive servicing practices and actively misleading consumers about their rights and risks of partial payments and loan extensions against Santander.

Santander is now required to provide relief to customers and, from now on, is required to factor a consumer’s ability to pay the loan into its underwriting. Pay out for Kansas customers depends on how and when the auto loan was made.

Kansans will get at least $2.9 million for certain loans with the potential of over $1.6 million in addition on other loans.

Eligible customers have been identified through Santander’s records and will be contacted by the claims administrator by phone or mail. Consumers do not have to submit a claim because eligibility is determined by the administrator.

Consumers that believe they are eligible for they payout may visit their website for more information.

Santander will pay $65 million in total to the 34 participating states for certain customers that defaulted on loans between Jan. 1, 2010, and Dec. 31, 2019. Those that have not had their cars repossessed Santander is required to allow them to keep the car and waive any loan balance, up to a total of $45 million in loan forgiveness.

Santander will also pay up to $2 million for the settlement administrator who will hand out the claims, and pay $5 million to reimburse investigation costs of the involved states.