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Maryland Attorney General Anthony G. Brown has announced a significant multistate settlement totaling $694 million with Credit Acceptance Corporation (CAC), a prominent subprime auto lender. This agreement, co-led by Maryland and attorneys general from 40 other states, aims to provide substantial financial relief and implement critical reforms to protect consumers with limited or impaired credit histories who obtain car loans through CAC. The settlement addresses allegations that CAC provided loans to individuals who could not reasonably afford them, leading to widespread defaults and vehicle repossessions, as well as concerns regarding the bundling of ancillary products with these loans.
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The investigation that culminated in this settlement focused on CAC’s lending practices, particularly concerning loans with low internal “scores” that indicated a low likelihood of full repayment. Attorneys general contended that CAC knowingly originated loans that consumers could not manage, often resulting in borrowers defaulting and subsequently losing their vehicles. Furthermore, the settlement resolves claims that CAC facilitated and failed to adequately prevent auto dealerships from engaging in “packing” CAC loan contracts with unwanted Vehicle Service Contracts (VSC) and Guaranteed Asset Protection (GAP) products. This alleged practice often occurred without consumers’ full awareness or consent, leading them to incur additional costs they did not intend.
The financial terms of the settlement are substantial. CAC will provide $60 million in cash restitution directly to consumers who received particularly risky loans. In addition to cash payments, CAC is mandated to offer significant debt relief. Specifically, $388 million in debt relief will be provided to consumers whose vehicles have already been repossessed, and $246 million will be allocated to consumers whose cars have not yet been repossessed, allowing them to retain their vehicles free of remaining debt. CAC will also contribute an additional $15 million to the participating state attorneys general. The settlement is set to become effective on November 2, 2026, with many of the debt relief provisions to be implemented by that date.
Beyond financial restitution and debt forgiveness, the settlement imposes stringent injunctive terms designed to fundamentally alter CAC’s business operations and safeguard consumers moving forward. These reforms include the establishment of “off ramps” for consumers with certain risky loans that quickly prove unmanageable, offering 95% debt relief and prohibiting CAC from pursuing collection lawsuits. This provision will be in place for five years, beginning November 2, 2026. CAC will also be required to implement a robust process to prevent the unlawful packing of VSC and GAP products. This includes enhanced pre-purchase disclosures, a post-purchase notification system for consumers, and ongoing dealer monitoring. Consumers will also receive clearer pre-loan disclosures detailing the risks of default and the actual value of the vehicle being financed. For a period of seven years, CAC will adhere to a price cap for vehicle sales, limiting them to 109% of the retail book value for certain consumers, and will implement measures to prevent dealers from inflating prices based on creditworthiness or exceeding advertised prices.
The executive committee overseeing this multistate effort was comprised of the attorneys general from Maryland, Arkansas, California, Illinois, Minnesota, and New Jersey. They were joined by the attorneys general from a broad coalition of states and the District of Columbia. Separately, New York is pursuing its own litigation against CAC in the Southern District of New York. Consumers in Maryland who have questions regarding this settlement can contact the Attorney General’s office at 410-576-6456. Eligible customers will be directly contacted by CAC for debt relief, and a claims administrator will notify consumers entitled to restitution.
Article by Mel Anara, based upon information from the Maryland Attorney General’s Office.
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