Credit Acceptance has confirmed with the Securities and Exchange Commission (SEC) that it had received a subpoena from the Mississippi attorney general on August 14, 2017. Credit Acceptance claims that the subpoena is only related to the origination and collection of non-prime vehicle installment contracts in the state of Mississippi.
Credit Acceptance has been issued five subpoenas or regulatory demands for information since 2014, including one from the Maryland attorney general in March 2016 requesting specific information over its repossession policies. The Department of Justice has also subpoenaed other lenders, including General Motors’s finance unit and the auto lender Santander Consumer USA.
While vague and without clarity on the allegations surrounding the Mississippi subpoena, in February 2017, the Federal Trade Commission was looking into whether these automotive finance companies are illegally harassing consumers with poor credit by imposing “Auto Interruption” or “Kill Switch” hardware onto their vehicles and potentially violating the borrowers privacy while also leveraging undue intimidation from the banks.
Ultimately, the FTC will be deciding whether the consumer interest of more subprime loan availability outweighs the privacy concerns.
There is also the matter of whether the technology is being used to violate fair collection laws. Regulators are investigating whether lenders are threatening to shut down vehicles remotely even when there is not legal ground to do so.
In 2014, the FTC settled with Consumer Portfolio Services for $5.5 million alleging similar intimidation strategies around calls to delinquent borrowers such as saying, “the tow truck is around the corner,” when in fact it was not. CPS neither admitted nor denied the allegations.
Credit Acceptance denies that there is any commonality in the Mississippi subpoena from the Maryland Subpoena and alleges that it is merely evidence of a “very heightened regulatory environment.”
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