Santander Consumer Agrees to Settle CFPB’s Claim, To Pay Fine

Santander Consumer USA Holdings Inc. SC has accepted the Consumer Financial Protection Bureau’s (CFPB) accusations that the former misguided its consumers by not disclosing certain essential stipulations of the company’s auto loans and insurance policies. This news was reported by Reuters citing persons familiar with the matter.

The company, which is a unit of Banco Santander, S.A. SAN, has agreed to pay a fine to settle the CFPB’s claim. The amount of fine has not yet been disclosed yet.

Santander Consumer offers a ‘Temporary Reduction in Payment Plan’ (TRIPP) option to its consumers, per which they are allowed to pay lower monthly installments for a certain period of time. But the company failed to reveal that such installments will comprise only the interest part and in hindsight, will actually increase the tenure and total cost of the loan for the borrowers.

Further, for its "guaranteed auto protection" (GAP) insurance policy, the company failed to reveal that it will not accept claims for car-replacement costs in certain accident cases. Also, the insurer did not state that there was a limit on the total claimable amount. Notably, Santander Consumer discontinued this insurance policy last year.

Per management, Santander Consumer has been trying to enforce strong consumer protection norms within its organization and keeping a check to ensure complete disclosures for its various plans.

Lately, the CFPB entered into a settlement with TCF National Bank, the banking subsidiary of TCF Financial Corporation TCF, over levying of overdraft fees without obtaining consumers’ consent. Earlier in April 2018, Wells Fargo WFC committed a breach of the Consumer Financial Protection Act for which had it to bear a $1-billion penalty imposed by the CFPB.

Shares of Santander Consumer have gained 14.7% year to date as against the 2.1% fall registered by the industry it belongs to.

Currently, the stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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