On March 29, 2017, the Massachusetts and Delaware Attorney Generals (“AGs”) announced settlements with a national bank, resolving allegations that the bank originated unfair and usurious automobile loans in violation of Massachusetts and Delaware consumer protection law. According to the AGs, the bank originated subprime loans to more than 2,000 Massachusetts and Delaware consumers despite knowledge that the income reported on the loan applications was fraudulent.
The AGs alleged that the bank originated loans in which it knew the reported incomes were inflated or otherwise incorrect. The bank also allegedly identified some dealers as “fraud dealers” who intentionally misrepresented borrower income on loan applications, but continued funding loans from those dealers despite such knowledge. The bank then sold the subprime loans to investors on the secondary market.
The settlements were the result of a joint investigation conducted by the Massachusetts and Delaware AGs. Under the Massachusetts settlement, the bank must pay $16 million in loan relief to more than 2,000 affected consumers and a $6 million settlement to the Commonwealth. Under the Delaware settlement, the bank must pay $2.875 million into a trust for the benefit of harmed Delaware consumers and just over $1 million to the Delaware Consumer Protection Fund.
The Massachusetts settlement is the second settlement reached with this particular lender in the last two years. A November 2015 settlement included a $5.4 million restitution payment to Commonwealth consumers, and was covered here by the Consumer Finance Enforcement Watch.