Executives evaded accountability by transitioning from one firm to another.
Executives from major lending institutions are not always held accountable for predatory practices that harm consumers, even when their tactics closely resemble those that led to significant legal settlements. In 2020, attorneys general from nearly three dozen states announced a settlement with Santander Consumer USA, one of the nation’s largest auto lenders for risky borrowers. They accused the bank of issuing high-interest loans to consumers who couldn’t afford them and allowing borrowers to defer payments, without disclosing the exorbitant costs that would accumulate as a result. Borrowers often ended up owing thousands in additional interest, and many lost their vehicles when they could no longer keep up with payments.
Despite this high-profile legal action, many of Santander’s executives had quietly moved to another auto lender, Exeter Finance. At Exeter, these former Santander executives used similar business strategies, targeting financially vulnerable consumers and pushing costly loan extensions, often without clear disclosure of the additional financial burden. While the purpose of the Santander settlement was to put an end to predatory practices, many state attorneys general seemed to take a softer approach when borrowers raised similar complaints against Exeter.
Exeter, which by 2020 had become one of the largest subprime auto lenders in the country, operated with a leadership team largely made up of former Santander executives who had overseen Santander during the period when the bank was accused of misleading customers. But unlike the aggressive scrutiny Santander faced, Exeter has largely flown under the radar. State attorneys general have not taken much action against the company, despite complaints that mirror the allegations made against Santander.
Investigations into Exeter’s business practices revealed that many of its borrowers, who were granted multiple loan extensions, found themselves trapped in a cycle of debt. These extensions, which often accrued thousands of dollars in additional interest, were granted with little clear explanation of their financial consequences. Exeter rarely disclosed to borrowers the full impact of the decision, leading many customers to unknowingly accumulate massive debts. In several cases, borrowers had their vehicles repossessed despite having paid the equivalent of or more than the original loan amount.
While attorneys general like Pennsylvania’s Josh Shapiro had championed consumer protections and cracked down on predatory lending at Santander, Exeter faced much less opposition from regulators. Some states, including Kentucky, Washington, and New Jersey, did little more than forward consumer complaints to Exeter’s corporate office, allowing the company to respond at its discretion. In some cases, state regulators did not follow up for months, by which time borrowers had already lost their cars to repossession.
Exeter, like Santander before it, defended its extension practices, claiming they were in full compliance with the law and were designed to help consumers stay in their vehicles. But the reality for many borrowers was different. Many found that the extensions, far from offering relief, pushed them deeper into financial distress. Instead of allowing borrowers to catch up on payments, the extensions reset the delinquency clock, allowing Exeter to repeatedly reclassify the loans as current while adding more interest to the balance.
The state attorneys general, who could have been a powerful force in holding Exeter accountable, often lacked the resources or will to pursue action against the company. In many states, consumer protection divisions are underfunded and understaffed, making it difficult to bring cases against large companies with significant legal resources at their disposal. As a result, lenders like Exeter can continue operating with little fear of facing serious consequences for their business practices.
The lack of enforcement from state regulators leaves auto loan borrowers with few options for recourse. Many car loan agreements include mandatory arbitration clauses that prevent consumers from taking their lenders to court, further limiting their ability to seek justice. Without strong oversight from state attorneys general, subprime auto lenders can continue to exploit borrowers, many of whom are already struggling financially.
In the absence of stricter regulation and more aggressive enforcement, the burden falls on consumers to navigate the murky waters of auto lending. For many, the promise of affordable transportation turns into a financial trap, with the very companies that should be helping them instead pushing them further into debt.
Sources:
Exeter Finance Execs Came from Bank Charged With Predatory Lending
Execs at North Texas lender charged with ‘predatory lending’ now leading another firm
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