N.J. borrowers to get $28.5M in auto loan settlement

Credit Acceptance will provide cash and debt relief and change lending practices under a multistate agreement.

New Jersey borrowers will receive more than $28.5 million in cash and debt relief under a $694 million multistate settlement with Credit Acceptance Corporation over allegations of predatory auto lending.

New Jersey and 40 other states reached a settlement with Credit Acceptance, one of the nation’s largest auto finance companies, on Sept. 17.

The states alleged Credit Acceptance targeted low-income people and borrowers with poor credit, providing expensive car loans that its own system predicted some borrowers could not afford. When borrowers defaulted, the company allegedly used “aggressive debt-collection tactics,” and many borrowers had their vehicles repossessed.

Credit Acceptance denies violating the law and entered the settlement without admitting wrongdoing or liability.

“Predatory and deceptive lending practices are especially harmful when they target consumers who can least afford the consequences,” Christopher Peterson, acting director of the New Jersey Division of Consumer Affairs, said in a statement. “We will continue to investigate lenders that take advantage of financially vulnerable consumers and hold them accountable when they violate the law. No company should be able to profit by trapping consumers in unaffordable debt or charging them for add-ons they did not knowingly purchase.”

New Jersey consumers will receive approximately $2.2 million in restitution and $25.6 million in debt relief as part of the settlement.

Credit Acceptance assigns each loan a proprietary score predicting the percentage of the loan it expects to collect. The attorneys general alleged that borrowers could not reasonably afford many loans with low scores, including some for which the company predicted borrowers would not repay even the principal.

“This resolution provides certainty for our business, our dealer partners and the customers we serve,” Credit Acceptance CEO Vinayak Hegde said in a statement. “The resolution allows us to keep our full attention on helping consumers who may have limited financing options obtain access to reliable transportation and the opportunity to improve their financial lives over time.”

Nationwide, Credit Acceptance will provide $60 million in cash restitution to borrowers who received particularly risky loans. It will also provide an estimated $388 million in debt relief to certain borrowers whose vehicles were repossessed and $246 million to certain borrowers whose vehicles were not repossessed, allowing them to keep their cars.

The debt relief applies to certain loans made from Nov. 1, 2015, through Nov. 30, 2025. Credit Acceptance must also ask the three major credit reporting bureaus to delete information associated with the affected accounts and stop collection activity on those debts.

For certain risky loans issued after Dec. 1, 2025, Credit Acceptance will be required to waive 95% of the remaining balance when borrowers meet specified criteria, and their vehicles are repossessed within 12 or 18 months. The company will also be prohibited from suing those borrowers to collect the remaining debt. Those requirements will remain in place for five years beginning Nov. 2, 2026.

The settlement also addresses allegations that auto dealers improperly added vehicle service contracts and guaranteed asset protection, or GAP, products to purchases financed through Credit Acceptance.

Vehicle service contracts are add-on plans covering some vehicle repairs. These GAP products generally cover the difference between what a borrower owes and the value of a vehicle if it is stolen or severely damaged.

The attorneys general alleged that some consumers did not know they were buying the products or were led to believe they were required to obtain financing. Under the settlement, Credit Acceptance must take steps to ensure consumers consent to the products, tell borrowers that the products are optional, make cancellations easier, and monitor dealers for potential violations.

Credit Acceptance must also provide certain borrowers with information about the risks of default and the vehicle’s retail value before a loan is completed. For consumers with credit scores below 600, the company must cap vehicle prices at no more than 109% of the highest retail book value. The price cap will remain in place for seven years.

The Consumer Financial Protection Bureau and New York initially sued Credit Acceptance in 2023 over its lending practices. New Jersey and 40 other attorneys general negotiated the settlement after the CFPB permanently dropped its case in 2025.