Santander settles with CFPB over lax disclosures

Dallas-based Santander Consumer USA has settled with the Consumer Financial Protection Bureau over allegations it used deceptive acts or practices in marketing auto loan add-ons and extensions.

Dallas-based Santander Consumer USA has settled with the Consumer Financial Protection Bureau over allegations it used deceptive acts or practices in marketing auto loan add-ons and extensions.

The company will pay about $11.8 million in restitution and a civil money penalty because it did not properly disclose terms and conditions of its auto loan add-on product and auto loan extensions.

As described in the consent order, the bureau found that Santander violated the Consumer Financial Protection Act of 2010 by not properly describing the benefits and limitations of its S-GUARD GAP product, which it offered as an add-on to its auto loan products.

Santander also failed to properly disclose the impact on consumers of obtaining a loan extension, including by not clearly and prominently disclosing that the additional interest accrued during the extension period would be paid before any payments to the principal when the consumer resumed making payments.

The company “represented … that S-GUARD GAP would provide ‘true full coverage’ by waiving the full amount left outstanding on a consumer’s loan after the primary auto insurance policy paid out,” the consent order said. The product was in fact limited to a 125 percent loan-to-value limitation, and Santander never informed consumers if they exceeded this limit, thus rendering them in eligible for the promised “true full coverage”. This affected 44,180 consumers who exceeded the LTV limit from April 1, 2012 to June 1, 2017, the bureau said.

In its extension marketing, Santander misrepresented the way interest would accrue and have to be paid back over the life of the extended loan, the bureau said. Call representatives didn’t disclose the amount of interest. Santander enrolled more than 2.3 million extensions to consumers from July 21, 2011 to Nov. 20, 2018.

Under the terms of the consent order, Santander must, among other provisions, provide approximately $9.29 million in restitution to certain consumers who purchased the add-on product, clearly and prominently disclose the terms of its loan extensions and the add-on product, and pay a $2.5 million civil money penalty.