Consumer complaint received 2023-07-15
Company: CREDIT ACCEPTANCE CORPORATION
State: OH
Product: Vehicle loan or lease
Sub-product: Loan
Issue: Managing the loan or lease
Sub-issue: Problem with additional products or services purchased with the loan

Complaint:
Closing its eyes to practices that harmed consumers : The company created financial incentives for dealers to add extra products to loans and then shrugged off whether customers were misled into thinking the add-on products were required. Add-on products, such as vehicle service contracts, are a profit center for Credit Acceptance. They represented about {$250.00} XXXX in revenue in XXXX alone. 
When borrowers default on loans, it can lead to severe consequences, including wage garnishment and an inability to borrow money in the future. A default on an auto loan can also lead to the borrower losing their means of transportation, which can cause job loss and a further spiral of damaged credit and financial distress. 

This is not the only action targeting Credit Acceptance for violation of consumer financial protection laws. For example, last year, the Massachusetts Attorney General secured more than {$27.00} XXXX for thousands of families harmed by Credit Acceptance.Hiding the true cost of credit : Since XXXX, Credit Acceptances loan agreements nationwide have said that consumers would pay interest at an average 22 % APR. However, the true cost of credit offered is far higher than what borrowers are told. This is because Credit Acceptances business model pushes dealers to manipulate the prices of vehicles sold to Credit Acceptance borrowers, based on borrowers projected performance. XXXX  then uses the projected collections to decide how much to pay its dealers. 
XXXX  pays dealers less for loans with lower scores because they are riskier, and XXXX  predicts it will collect less. Because XXXX  sets the interest rate for the loan and that interest rate does not change based on borrower risk, XXXX  lending model incentivizes dealers to sell cars at inflated prices, which increases the amount XXXX  pays the dealer. 
5. This means the principal amounts in XXXX  loans are often artificially inflated and far exceed the amount XXXX  expects to collect on the loan or has paid to its dealers. And because XXXX  has shifted the cost of the credit into the principal amount instead of the interest rate, consumers do not know they are paying these hidden costs of credit to finance their vehicles. 12 U.S.C. 5531 ( a ) ,5536 ( a ) ( 1 ), 5536 ( a ) ( 3 ), THEY ARE IN VIOLATION by obscuring the cost of credit for auto loans and taking unreasonable advantage of consumers lack of understanding of the risk of default and the severity of the consequences, as well as their inability to protect their interests, and for providing substantial assistance to dealers, even though XXXX  knew or should have known the dealers were misrepresenting the voluntary nature of add-on products. THEY JUST HAD A BIG LAWSUIT FOR A HIGH APR RATE AND THATS WHAT THEY DID TO ME MY APR IS XXXX, FINICANCE CHARGE IS WHAT I SUPOSED TO PAY FINCANCE CHARGE IS THE SUM OF ALL CHARGES ( ALL CHARGES ) ACCORDING TO THE LAW 15 U.S. Code 1605 - Determination of finance charge WHICH STATES Examples of charges which are included in the finance charge include any of the following types of charges which are applicable : ( 1 ) Interest, time price differential, and any amount payable under a point, discount, or other system or additional charges. 
( 2 ) Service or carrying charge. 
( 3 ) Loan fee, finders fee, or similar charge. 
( 4 ) Fee for an investigation or credit report. 
( 5 ) Premium or other charge for any guarantee or insurance protecting the creditor against the obligors default or other credit loss. 
( 6 ) Borrower-paid mortgage broker fees, including fees paid directly to the broker or the lender ( for delivery to the broker ) whether such fees are paid in cash or financed.

Company public response: Company has responded to the consumer and the CFPB and chooses not to provide a public response
Company response to consumer: Closed with explanation