Credit Acceptance Corp has agreed to a $710 million settlement with 40 US states and Washington DC to resolve allegations that the nation’s largest subprime auto lender drove thousands of low-income borrowers into predatory loans it knew they could not afford — and then helped car dealers push unnecessary add-on products onto those same consumers.

The settlement, announced Thursday by New York Attorney General Letitia James, is one of the largest consumer protection resolutions in the auto lending industry’s history.

What Credit Acceptance Allegedly Did

States alleged that Credit Acceptance — headquartered in Southfield, Michigan — targeted consumers with low incomes and low credit scores, approved them for loans it knew carried extremely high default risk, and then collected aggressively when those borrowers inevitably fell behind.

Specifically, the states alleged Credit Acceptance:

  • Approved loans for borrowers it knew could not afford the payments based on its own internal risk models
  • Helped car dealers push consumers to buy vehicle service contracts, insurance, and other add-on products they did not need or were never told about
  • Collected payments aggressively and repossessed vehicles from borrowers who defaulted on loans the company knew were unaffordable from the start

One case highlighted in court papers illustrates the pattern: Credit Acceptance approved a $260-per-month loan for a mother of two whose total monthly income was just $950. The company collected $8,400 from her before repossessing her vehicle — twice.

Many borrowers ended up defaulting, having their vehicles repossessed, and suffering severe damage to their credit scores — leaving them worse off than before they took out the loan.

The $710 Million Settlement Breakdown

The total settlement value of $710 million is structured in three parts:

  • $634 million in debt forgiveness for more than 55,000 borrowers who took out loans between November 2015 and November 2025
  • $60 million in cash restitution to thousands of other affected borrowers
  • $15.5 million civil penalty paid to the states

For the more than 55,000 borrowers whose debt is being forgiven, this means Credit Acceptance will write off what they owe — potentially saving individual borrowers thousands of dollars and allowing them to start rebuilding their credit.

What Credit Acceptance Must Change

Beyond the financial payment, the settlement requires Credit Acceptance to fundamentally change how it lends:

  • Risk disclosure: Warn borrowers in advance when their loans carry a historically high risk of default
  • Default protection: Waive 95% of the outstanding debt if those high-risk borrowers default within 12 or 18 months of taking out the loan
  • Collection restrictions: Refrain from suing high-risk defaulters to collect the remaining debt or selling that debt to third-party collectors

These changes effectively force Credit Acceptance to absorb the losses when its own risk models prove correct — rather than passing those losses onto the borrowers it knew were likely to fail.

A Pattern Across the Industry

The Credit Acceptance settlement is the latest in a series of major enforcement actions targeting subprime auto lenders and dealership financing practices:

The case was originally filed in Manhattan federal court in January 2023 jointly by New York’s Attorney General and the Consumer Financial Protection Bureau. The CFPB withdrew from the case in April 2025 under the Trump administration, which has significantly curtailed the agency’s enforcement activity. The states continued pursuing the case independently and secured the settlement without federal involvement.

“CAC preyed on consumers in New York and across the nation with false promises of affordable loans, only to exploit them with outrageous interest rates that ruined their credit and cost them their cars,” Attorney General James said.

Credit Acceptance denied wrongdoing in agreeing to settle. CEO Vinayak Hegde called the settlement “constructive, customer-focused and consistent with the direction of regulatory expectations in our industry.”

Could You Be Eligible for Compensation

If you took out an auto loan through Credit Acceptance between November 2015 and November 2025 and experienced any of the following, you may be eligible for debt forgiveness or cash restitution:

  • Your vehicle was repossessed
  • You defaulted on your loan
  • You were sold add-on products at the dealership you did not request or understand

Watch for notices from the settlement administrator or your state Attorney General’s office with instructions on how to claim your share. Eligible borrowers whose debt is being forgiven should receive direct notification.

InjuryWatch News will continue tracking auto lending enforcement and consumer protection settlements across the United States.