Lending overcharges lead to average $11,000 repayments to consumers
By NBP Staff | November 6, 2015, 15:37 EDT
BOSTON – Hundreds of Bay State motorists are about to get some good news as Santander Bank plans to pay an average of $11,000 in restitution for overcharges on some subprime auto loans, according to Massachusetts Attorney General Maura Healey.
In a settlement filed in Suffolk Superior Court, the bank’s auto finance unit agreed to settle state claims that consumers with poor credit paid excessive interest on car loans. In a statement, Healey said more than 450 “economically disadvantaged consumers” in Massachusetts will share $5.4 million in restitution, with amounts averaging $11,000 each.
The lender, Santander Consumer USA Holdings, has agreed to eliminate interest on certain loans it purchased that allegedly charged excessive interest rates because they included coverage, called GAP, that was supposed to make up the difference between a totaled vehicle’s replacement value and the amount still owed on the vehicle, Healey’s office said Thursday in a statement. It said the bank has also agreed to waive outstanding interest on the affected loans and to reimburse borrowers for interest they’ve already paid.
Healey’s office indicated that recipients of the payments are concentrated in Boston, Worcester, Springfield, Pittsfield, and Lowell.
GAP coverage is often sold to consumers by car dealers as an add-on product that is rolled into the vehicle financing, according to Healey’s office. For the affected consumers in line for payments, the fees for the coverage when added to the other lending costs pushed the effective interest rate on the auto loans to more than the 21 percent state cap.
The loans came to light earlier this year after an internal review by the lender and company officials notified Healey’s office, the bank said in a statement. It said the settlement was in line with its plan to reimburse affected consumers and that lending procedures had been changed to ensure its loans stay within state interest-rate limits.
Consumers due a repayment will be notified by the bank, Healey’s office said.