Santander Consumer pays $3M to resolve another regulatory matter

Santander Consumer USA in Dallas has paid $2.9 million to consumers in Connecticut to settle charges that it violated state law in its handling of repossessed motor vehicles, the state banking commissioner said Tuesday.

The $39.4 billion-asset subprime auto lender incorrectly calculated the balances owed on repossessed cars, failed to provide certain documentation after repossessing buyers’ cars, and charged convenience fees that it should not have, Banking Commissioner Jorge Pérez said in a press release.

The $2.9 million reimbursed 3,730 Connecticut residents for principal, interest or other fees they should not have been charged. In addition, the lender paid the state a $100,000 fine.

“I am happy thousands of Connecticut consumers have seen relief as a result of our department’s continued efforts to protect residents and ensure companies are following the law,” Pérez said. “It is critical that we maintain ... a watchful eye so we can minimize risks to our consumers.”

The settlement stemmed from a 2016 investigation. In addition to the mistaken balances, Santander Consumer improperly charged convenience fees for debit and credit card payments, the commissioner said. It was also supposed to provide buyers with itemized statements showing how sale proceeds from their repossessed vehicles were applied within 30 days of the sale, but it did not.

In the consent order, Perez said that Santander Consumer was cited for similar issues during a 2011 examination. At the time, the company reviewed its portfolio of Connecticut accounts and waived about $11.4 million in balances from 1,424 consumers’ accounts and said that that wouldn’t happen again.

A Santander Consumer spokeswoman described the order as a "voluntary agreement" and said that it is part of "the ongoing evolution" of the company.

"We are pleased to put this matter behind us,” the spokeswoman said in an email to American Banker. “Today’s announcement demonstrates our commitment to resolving legacy issues under CEO Scott Powell and the new leadership team.” Powell took over in August, succeeding Jason Kulas.

The spokeswoman also said that Santander had made “major strides” in the past year. Its parent company passed the Federal Reserve’s stress test, and the Fed terminated a 2014 supervsory agreement.

Still, Santander Consumer has been the subject of numerous federal and state investigations, including an inquiry on behalf of 30 state attorneys general regarding the underwriting and securitization of subprime auto loans. Also, Santander Consumer in 2016 restated its financial results several times because of a slew of problems with the way it calculated its provision for loan losses.