Facts

Defendant Santander Consumer USA, Inc. has consistently accounted for the largest share of the subprime auto lending market. Defendant primarily makes direct loans to consumers and purchases installment contracts from dealers. The People of the State of California filed lawsuit against defendant Santander Consumer, USA Inc. for violations of the Unfair Competition Law, Business & Professions Code Section 17200.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that defendant violated consumer protection laws by intentionally placing borrowers with subprime credit into auto loans which defendant knew had a high probability of default. In addition, plaintiff contended that defendant failed to monitor auto dealership behavior in order to minimize the risk of receiving false information in relation to the auto loans, including consumers' income and expenses.

DEFENDANT'S CONTENTIONS: Defendant denied plaintiff's contentions.

Result

The parties settled the case for over $550 million, which consisted of a $70 million payment to consumers defendant approved for its loans. The rest of the settlement amount was composed of waivers of customer deficiency balances and in-kind relief. In addition, as injunctive relief, defendant agreed to comply with the UCL. Specifically, defendant must review a Consumer's Residual Income prior to purchasing an auto loan.