More than 55,000 borrowers will have auto-loan debt erased under a $700 million settlement with subprime lender Credit Acceptance Corp., including about 2,500 New Yorkers, the state attorney general's office announced.
The agreement includes more than $630 million in debt relief, $60 million in restitution for consumers whose vehicles were repossessed and $15.5 million in penalties to the states. New York is expected to receive about $34 million in consumer debt relief, restitution and penalty payments.
Attorney General Letitia James reached the settlement with a bipartisan coalition of 39 other states and the District of Columbia. The agreement also requires Credit Acceptance to change how it handles certain defaults and add-on products sold with vehicle loans.
The attorney general's office and the Consumer Financial Protection Bureau sued the company in January 2023 after a multiyear state investigation. The lawsuit alleged that Credit Acceptance pushed people with low credit scores or little credit history into loans they could not afford and obscured the full cost of those agreements.
State describes costly loans and repossessions
Credit Acceptance specializes in subprime auto financing and markets its loans to lower-income borrowers who may struggle to obtain credit elsewhere. The attorney general's office said the average annual interest rate on its loans exceeded 38%, while some rates topped 100%.
Investigators alleged the company anticipated what it would collect through cash payments, repossessions, vehicle auctions and wage garnishment, then structured agreements with dealers to protect its profits even when borrowers defaulted. Nearly half of consumers had their vehicles repossessed during the life of their loans, according to the state.
The lawsuit also accused the lender of helping dealers sell expensive add-on products and insurance that consumers were told they needed to obtain financing or were not told about at all. The state said the company knew about those practices but did not stop them.
Investigators further alleged that Credit Acceptance packaged the loans into securities sold to investors while falsely representing that the underlying loans complied with the law.
The Consumer Financial Protection Bureau withdrew from the case in April 2025 without obtaining a settlement. New York continued the litigation with the multistate coalition before reaching the new agreement.
Settlement sets rules for future collections
Credit Acceptance will eliminate all debt owed by more than 55,000 consumers nationwide, accounting for more than $630 million of the settlement. Thousands of other consumers who lost vehicles to repossession within months of taking out their loans will share the $60 million restitution fund.
For certain at-risk borrowers who default within 12 or 18 months and whose vehicles are repossessed and sold, the company must forgive 95% of the remaining debt. It may collect only the other 5% and cannot sue over the forgiven balance or sell the debt to another collector.
The company must also contact consumers outside dealership showrooms to clearly explain any add-on products included in their purchases. Borrowers must be given a way to cancel those products without surrendering their vehicles.
The coalition includes attorneys general from 40 states, including New York, as well as the District of Columbia. Hawaii's Office of Consumer Protection also joined the agreement.
James said the settlement was intended to compensate consumers who were placed into high-cost loans and to prevent similar lending and collection practices. The agreement resolves the coalition's claims while imposing the debt forgiveness, restitution, penalties and business-practice changes.
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