Santander Consumer USA Holdings Inc, a unit of Spain’s Banco Santander, will pay nearly $25 million to two U.S. states — $22 million to Massachusetts and $2.87 million to Delaware — to resolve predatory subprime auto loan allegations.
“I think the scope of the settlement and the kind of relief we’re getting could be used as a model for other jurisdictions,” Massachusetts Attorney General Maura Healey told Bloomberg News, adding that $16 million of the total will go to consumers. At a news conference, Healy cited an example of one Massachusetts buyer who wound up owing over $10,000 on a $750 vehicle loan.
Auto lending is big business for Santander — it is $38.5 billion of the bank holding company’s $137 billion in assets. Recently, new policies have been put in place to identify deal misconduct. Santander has also created an Officer of Consumer Practices to ensure that customers are treated fairly.
Last week, the Federal Reserve told Santander to increase oversight of its subprime auto lending, giving the bank two months to put together a plan ensuring that all levels of the bank’s staff are instructed to improve the bank’s compliance with federal consumer protection laws.
“The work necessary to address the new agreement is well under way and will not require a significant change to our plans,” said Santander spokesperson Ann Davis.
These allegations come as the latest in a string of regulatory actions Banco Santander has faced here in the States in the past few years. Back in 2015, Santander paid Massachusetts $5.5 million to settle an investigation into overpriced insurance-added subprime auto loans, which led to the deals exceeding state usury limits. Earlier this year, the Office of the Comptroller of the Currency downgraded Santander’s rating in community lending.