Government drops cases against ‘predatory’ financial firms

One after another, the debtors were called to stand before the judge.

First came Adrian Vega, a painter, and his wife, Natalie, a cleaner. Moments later, Andrew Vanderhoof, a mechanic.

In rapid succession, three more names were called. Each was being sued by Credit Acceptance Corporation, one of the nation’s largest subprime auto lenders. This scene played out last month in Rockford, Illinois, but it has been repeated in courtrooms across the country. Every month, Credit Acceptance files hundreds of lawsuits against borrowers.

For two years, the Consumer Financial Protection Bureau, the nation’s financial watchdog, has sought to restrain Credit Acceptance, accusing it in a lawsuit of making “predatory loans to millions of financially vulnerable consumers trying to buy a used vehicle.” But the CFPB’s enforcement effort stopped in April when the agency withdrew from the lawsuit.

The CFPB’s reversal in the Credit Acceptance case reflects how, under the Trump administration, the agency’s new approach to enforcement may be felt by consumers nationwide. The agency’s withdrawal left only its co-plaintiff, the New York attorney general, to continue the enforcement lawsuit, so any final ruling would affect only New York.

The first out of the Rockford courtroom were the Vegas, appearing dazed. The judge had ordered them to pay the company $12,797.58.

“It’s ridiculous,” Adrian said as his wife’s eyes welled up with tears.

Credit Acceptance lends money at high interest rates — usually over 20% — to customers buying a used car from its network of dealers, which charge an unusually high markup, according to the lawsuit. It repossesses about a quarter of the cars.

Since President Donald Trump’s second term began, the CFPB has moved to terminate or dismiss 18 such enforcement lawsuits, according to research by the Consumer Federation of America, a nonprofit advocacy organization. Those cases had accused banks, mortgage firms and installment lenders of financial abuses and deception.

“These retreats are gifts to predatory lenders and would-be fraudsters,” said Erin Witte, director of consumer protection at the Consumer Federation of America. “They are being told over and over that they can keep on doing what they are doing.”

In a statement, Credit Acceptance officials said “we categorically reject the portrayal of our business practices as ‘predatory.’ For over 50 years, we have provided access to credit for individuals who are often overlooked by traditional lenders. … The vast majority of our customers are grateful for and satisfied with the service we provide.”

CFPB lawyers and the agency’s press office did not respond to requests for comment for this story. On June 10, Cara Petersen, the acting head of enforcement for the agency, quit after sending a staff email denouncing the Trump administration’s efforts to gut the agency. The agency’s acting director is Russell Vought, the White House budget director and an author of Project 2025, the right-wing blueprint for reshaping the federal government.

The Trump administration and its supporters have long campaigned against the CFPB, an agency established by Congress after the 2008 financial crisis. They have argued that the financial watchdog agency overstepped its authority during the Biden administration.

High prices

After the CFPB withdrew from the Credit Acceptance suit in April, Erin Kerber, the company’s chief legal officer, issued a statement lauding the decision. The case “never should have been brought in the first place,” she said.

The company and its supporters say such firms play an important role because they provide loans to people who may have nowhere else to turn. Critics say the loans set up customers for failure.

For some borrowers, a Credit Acceptance loan has been the first step toward a financial setback. In 10 recent court cases filed in Rockford examined by The Washington Post, the borrowers bought cars at prices, set by the dealer, that were above fair market value. When customers failed to keep up with payments, their cars were repossessed. That, however, did not end the company’s demand for payment. After the repossessed cars were sold at auction, proceeds did not cover their debt to Credit Acceptance. So even as they lost the car, often within a year, they still owed Credit Acceptance several thousand dollars.

Ingrid Anderson purchased a 2013 Chevrolet Captiva Sport with 138,000 miles on it for $10,285. According to Kelley Blue Book, a fair price for such a car in good condition at that time was about $6,524. She enlisted her mom to be a co-signer.

Anderson immediately noticed problems with the car, she said — it emitted black soot and the brake lines needed to be replaced. The car was repossessed. The company said it offered the Andersons a chance to resolve the debt for less than was owed, but they could not afford the offer. The company is suing them for $10,218.

Credit Acceptance said it was not aware of the car’s condition and seeks to prevent unfair pricing and the sale of low-quality cars.

Anderson, who lives in Tampico, Illinois, with her four children, said she was shocked by the company’s methods.

“I know they want their money,” she said. “But I don’t have it.”

Billion-dollar business

Credit Acceptance works through a network of 12,000 independent auto dealers who sign agreements with Credit Acceptance. They use the company’s software to draw up loan contracts and receive marketing assistance. Under the Credit Acceptance system, each borrower’s contract is assigned a score, based on personal and financial data, estimating how much the company can expect to collect on the loan. Most of the company’s customers have poor credit scores and relatively low incomes.

Over the years, the company’s practices have been repeatedly criticized by state regulators and consumer watchdogs. In 2023, when the CFPB sued Credit Acceptance, it made similar claims.

According to the lawsuit, Credit Acceptance provided loans without regard to whether borrowers could afford them. For almost 4 out of 10 loans, Credit Acceptance projected that it would not be able to collect the full amount financed by the loan, the government said.

Even though many Credit Acceptance customers could not repay the loan, according to the lawsuit, the company could profit because it incentivized dealers to overcharge for cars and to sell add-on products. The system also increased auto prices for consumers least likely to pay, it said. The company further boosted its revenue with aggressive collection efforts, including repossession.

Customers typically face substantial debts on a Credit Acceptance loan even after a car is lost to repossession, the lawsuit said, because the prices they had paid were so high. The average sale of the repossessed cars satisfied only 29% of the remaining amounts owed, according to the lawsuit. When Credit Acceptance sues to collect on the remaining debt, moreover, customers rarely prevail in court.

The quickest deal

After the Vegas left the courtroom, the next to stand before the judge was Vanderhoof, the mechanic.

Two years ago, his car broke down, and the 34-year-old father of six quickly needed another to commute to his job 70 miles away in Aurora. He stopped at Loves Park Auto, part of Credit Acceptance’s network of auto dealers. It was late afternoon, and he felt uneasy about keeping the salespeople from being able to close up shop.

“I made the quickest deal I could with the $850 in my pocket,” he said.

He ended up with a 2017 Hyundai Sonata with 96,000 miles on it. He paid $15,105 for the car, far more than it was worth. The salesperson also signed him up for an extended warranty for the car, for another $1,610, and for “GAP Protection” for another $1,189, which was supposed to help pay off the car loan in case it was totaled or stolen.

In all, he took out a loan of $18,493, with an interest rate of 25%.

Seven months later, he said, the engine blew. When neither the dealer nor Hyundai would fix it, he gave the car back to Credit Acceptance. A manager at Loves Park Auto declined to comment. Credit Acceptance sued Vanderhoof for the remaining balance of $13,548.

In court last month, Vanderhoof told the judge that the company and its dealers should do a better job of ensuring that the vehicles being sold were in good shape.

The judge then entered a judgment against him obliging him to pay the full amount.

“What they did to me was insane,” Vanderhoof said after the hearing. He said he supported Trump for president, but he said the CFPB should have continued its lawsuit against the company.

“Absolutely,” he said. “When it comes to bigger companies, money is the root of all evil, and they don’t care how they get it.”