Santander Settlement Will Affect Car Buyers Looking For Financing
Santander is a bank that has options for people with credit challenges in the way of getting their new or used vehicle. When other banks have shied away from subprime loans, Santander has been there to help many people move forward with one financial product or another. It seems, however, that Santander has placed itself in trouble by helping too much. Consequently, in the future, people looking to finance their next vehicle may not have Santander as available to them as before.
According to a post from Reuters, Santander Consumer USA Holdings Inc., was recently involved in a case with 33 states. The case was made that the bank underestimated the risk involved with loans for people considered a higher risk.
What the states said
According to the states,
“Santander violated consumer protection laws by placing borrowers with subprime credit into auto loans it knew carried a high probability of default. Santander has agreed to pay $65 million for restitution for some customers and to waive deficiency balances on loans worth $478 million. It will also pay $7 million to the states to manage restitution claims.”
What Santander is doing about it
According to the report, Santander,
“agreed to make changes to its underwriting practices as part of a $550 million settlement with 33 states and the District of Columbia over subprime auto loans.”
What this means to car buyers
Santander has been a longstanding stalwart bank in the field of helping people overcome credit challenges and get into their next vehicle. However, with this new ruling, Santander will be forced to modify its offerings so as not to overextend itself with customers that have a higher likelihood of default. This means its offerings and reach will probably be limited to a certain degree. In essence, the bank walked out on thin ice and paid the price. So, to avoid a repeat of the same situation, Santander will have to take measures to ensure that the ice is not so thin in the future.
What does this look like at the dealership
Some people do not need help with financing an automobile. Their credit is good enough that they can sail through the process with almost any bank. Other people, those with credit histories that have hiccups, need help. Santander was good at providing that help. But, as a result of this legal ruling, the bank will now be forced to be more careful with whom it signs contracts with. Its helping hand will likely not be able as available as it was before. The choice of customers it chooses to work with will be more selective.
On the other hand, the bank’s prior practices can also be looked at as predatory in nature. Stereotypes of the big corporate entity taking advantage of people have been tossed into the conversation by the public in relation to this case, and most any lawsuit involving a bank. So, some might see this as a bank getting what was coming to them.
In either case, whether Santander was helping people and got burned, or the bank was preying on people and is reaping what it sowed, it was a costly mistake. The bank will now be paying damages to clear its name, and dealerships will be forced to look for other auto loan financing options for their customers. Also, as long as consumer memories can hang on to things, Santander will be forced to tread lightly.