In early 2020, attorneys general from nearly 36 states announced a significant legal agreement with the largest auto lender for high-risk borrowers. Officials accused Santander Consumer USA of issuing high-interest loans to individuals who could not afford them and allowing delayed payments without revealing the considerable costs. As a result of these extensions, some customers owed thousands in surprise interest charges and many lost their cars.
Josh Shapiro, then the attorney general of Pennsylvania and now its governor, emphasized that such predatory lending practices were reminiscent of those that led to the 2008 financial crisis. The settlement introduced new consumer protections and required transparent disclosures concerning loan extensions. Despite the settlement, Santander did not admit any wrongdoing, referring to the issue as a “legacy underwriting issue.”
By the time the settlement was publicized, former Santander executives who had been implicated in the investigation had taken leadership roles at another lender, Exeter Finance. By 2020, Exeter’s leadership, including its CEO and operations chief, consisted largely of individuals who had previously managed Santander during the time of alleged misleading practices.
Contrary to expectations, the approach of attorneys general towards Exeter was notably different, with few actions taken in states that participated in the Santander settlement, even after receiving similar borrower complaints about Exeter. A ProPublica investigation showed that nearly 200 consumer complaints over Exeter’s practices were rarely pursued by regulators.
In Washington, regulators requested Exeter’s participation in voluntary mediation, which the company ignored. In New Jersey, complaints were forwarded to Texas, Exeter’s base state, with no further action. In Kentucky, a complaint was left unaddressed as the borrower’s car was repossessed.
Some attorneys general opted not to answer queries for the article, while others, including Pennsylvania, Georgia, and California, withheld document release in response to public records requests. Experts point out that state attorneys general often face limitations in staff and resources, which companies are aware of. Georgia and Louisiana are reportedly investigating Exeter following ProPublica’s reports, though details remain confidential.
The enforcement actions of attorneys general are crucial, considering the limited legal recourse available to auto loan borrowers. Many loan contracts enforce arbitration over civil court actions, hindering consumer rights lawyers from pursuing cases against lenders like Exeter.
Over the past ten years, Exeter has risen to become a significant player in the market, with over 500,000 active loans valued at $10 billion. Extensions are a central aspect of Exeter’s business model, typically accruing thousands of dollars in additional interest charges for borrowers. Many customers claimed Exeter’s disclosures about these charges were unclear.
While Exeter’s executives did not provide comments when approached, the company defended its extension policies, asserting that they are in compliance with all relevant regulations. However, a ProPublica investigation found that the very extensions designed to help borrowers could, contrarily, result in vehicle repossession.
Upon new management’s arrival in 2016, Exeter shifted its lending approach, approving customers with debt-to-income ratios as high as 70%, accepting lower credit scores, and extending longer repayment terms. The number of loans with multiple extensions surged after 2016, correlating with increased company revenue.
In response to complaints about Exeter’s practices, some state attorneys general did not engage in investigations. Consumers like Deborahlyn Wells from Kentucky and Matthew Hutchinson from Washington experienced significant challenges in seeking resolution through legal channels.
Even states that took part in the Santander settlement, such as Illinois, have faced criticism for their handling of complaints against Exeter. ProPublica’s analysis indicates a pattern of limited enforcement action from attorneys general, constrained by resource realities, which companies reportedly exploit to evade accountability.
