The Delaware Department of Justice has reached a $550,000 settlement with a company accused of marketing subprime auto loans to hundreds of Delaware car buyers, Attorney General Kathy Jennings announced Monday.
The DOJ said in a statement that Exeter Finance LLC had signed a cease and desist agreement, after a larger investigation revealed that it had facilitated car loans to consumers with poor credit. Under the agreement, which also included the Massachusetts Attorney General’s Office, Texas-based Exeter will pay the state of Delaware $50,000 and ask major credit bureaus to wipe all trade lines on the credit reports of affected consumers, the department said.
“Protecting consumers from unfair lending practices is extremely important,” Jennings said. “Today’s settlement with Exeter provides monetary relief to Delaware borrowers and repairs damaged credit.”
Exeter did not admit to breaking any state or federal laws and neither confirmed nor denied the allegations as part of the agreement. A company spokesman said Monday that Exteter was “pleased to have resolved this matter.”
“Exeter is committed to ensuring the highest standards of customer service in its business when delivering vital auto financing options to consumers,” the spokesman said.
The settlement with Exeter was part of Jennings’ industrywide review of securitization practices in the subprime auto market. In March, the DOJ secured nearly $2.9 million from Santander Consumer Consumer USA Holdings Inc., another auto financier, for its role in financing similar loans.
“Our office will continue to investigate the subprime auto lenders to ensure that Delaware consumers receive a fair deal when they are extended credit to finance a purchase,” Jennings said.
According to the DOJ, subprime auto loans are often made through contracts signed at the car dealership, but funded by non-dealer financial institutions, like Exeter and Santander. As a part of the funding process, those institutions convert the loans to securities and fund them by selling investment notes.
Under the settlement, Exeter is required to pay $550,000 to an independent trust, which will be used to repay affected customers, as well as to cover the costs of implementation and the DOJ’s investigation. An independent trustee, chosen by the DOJ and Exeter, would be responsible for administering the fund.
It will be up to the DOJ, however, to determine the amount of restitution provided to Delaware borrowers. The department is expected next month to provide the trustee with a list of consumers it believes are eligible for relief based on loans and certain subprime contracts that Exeter acquired between 2011 and 2015.
The case was handled by the DOJ’s fraud division, which includes investor protection director Jillian Lazar, consumer protection director Christian Wright, Deputy Attorneys General William Green and Joseph Tabler, forensic accountant Clyde Hartman, and paralegal Courtney Patas. It was initiated by former investor protection director Owen Lefkon.