“Over the last several years, we have strengthened our risk management across the board - improving our policies and procedures to identify and prevent dealer misconduct, and tightening standards to ensure affordability,” Santander said in a statement, according to Banking Dive. As a result, the lender has reportedly set aside funding and made changes in anticipation – meaning that their earnings will not be impacted. Santander has reportedly been expecting to reach a settlement to resolve the 2015 multi-state probe. The final terms of the Santander car loan settlement requires the company to maintain fair policies and procedures for deferments, forbearances, modifications and other collection matters that all employees must follow.
Going forward, the lender will reportedly stop allowing such exceptions and will be required to monitor dealers for income inflation, expense inflation and power booking. Previously, Santander allegedly allowed problematic third-party dealers, such as those offering vehicle service contracts, to waive documentation requirements for income and expenses. Should the test reveal that the loan was unaffordable to the consumer and the borrower defaulted within a certain period of time, the loan must be forgiven by Santander. This test must account for basic living expenses, according to the settlement terms. If Santander loans default in the future, the company will reportedly be required to test these loans to see if the consumer had a negative residual income at the time of the financing origination.
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The loan company will be required to consider the borrower’s full list of actual monthly debt obligations before extending a Santander car loan.Īdditionally, if a consumer has a negative residual income after considering these monthly obligations, Santander will not extend financing. Going forward, the settlement also requires Santander to change their practices to better serve consumers. Should the company successfully acquire the loans, they will provide additional deficiency waivers, according to the settlement website. This is reportedly twice as much as any other subprime auto loan lender.įor loans that Santander has sold, the company will attempt to buy these loans back under the settlement terms. In 2019 alone, the company issued $8.3 million of these bonds. Santander’s loans were reportedly packaged into bonds by the company and sold to investors. Certain defaulted consumers will have their deficiency balances waived by the company, with Santander agreeing to provide up to $433 million in immediate loan forgiveness. Loan forgiveness will also be extended to other consumers, according to the Santander car loan settlement website. In total, these customers will be offered up to $45 million in loan forgiveness. 31, 2019.įor Santander car loan borrowers who have not had their cars repossessed despite having the “lowest quality loans,” the company will reportedly allow them to keep their cars and waive any remaining loan balances. This restitution will compensate certain subprime borrowers who defaulted on Santander auto loans between Jan. Santander has agreed to pay $65 million in restitution to the 34 states participating in the investigation. 1405 and ask that it be reported by number.“This settlement should be a warning to the industry that we are committed to protecting consumers from abusive business practices.”Īccording to the multi-state investigation website, Santander knew that some of their borrowers were at a high risk of default but turned a blind eye to these risks and exposed these borrowers to “unnecessarily high levels of risk through high loan-to-value ratios, significant backend fees, and high payment-to-income ratios.” The online Record has been corrected to re\ad: Mr. 1450 and ask that it be reported by number. On page S1796, March 25, 2021, first column, the following appears: Mr. \r\rThe online Record has been corrected to read: \rMr. CORRECTION)/Rect/Subj(Text Box)/Subtype/FreeText/T(CORRECTION)/Type/Annot>