Credit Acceptance Corp to forgive hundreds of millions in debt to resolve consumer protection case

By Reuters News

Sept 17 (Reuters) - Credit Acceptance Corp CACC.O will pay $75.5 million, forgive more than $630 million of consumer debt, and reform its lending practices to resolve allegations by most U.S. state attorneys general that the subprime auto lender violated various consumer protection laws, Minnesota Attorney General Keith Ellison said on Thursday.

The settlement resolves allegations that the Southfield, Michigan-based company financed risky auto loans that it knew or should have known consumers could not afford, and sold expensive add-on products that consumers did not know they were buying, Ellison said.

The reforms include requirements that Credit Acceptance tell borrowers in advance that their loans carry a historically high risk of default and waive 95% of the amount owed if those borrowers default within the first 12 or 18 months, Ellison said.

Credit Acceptance did not immediately respond to a request for comment. Ellison said the settlement included a bipartisan coalition of 41 state attorneys general.

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