How bankers partner with car dealers to rip off their customers? Hi, I'm Kevin Hunter, also known as the Homework Guy with a consumer alert on lending in the car business. Today, I want to talk about the bank's car dealers use and how these lenders are partnering with the dealership to rip you off. The story you're about to hear is not likely to get much press in mainstream media. That's why I'm making sure we cover it here on the Homework Guy channel. You deserve to know. If you're one of the millions of car buyers who finance your car with a dealership lender, listen up. Dealers have favorites and among them are banks like Santander, Regional Acceptance, Capital One, Wells Fargo, Ally Bank, Bank of America, Chase, Fifth Third Bank, to name a few. If you signed on with one of these banks, especially Santander, pay special attention to what I'm about to share. First, I want to be crystal clear. I'm not saying that every bank that I listed is ripping customers off. What I'm saying is that this specific problem has a potential to happen with any bank that car dealers partner with. Car buyers take plenty of abuse from dealer finance officers and far too many dealer-related banks are helping them do it. Here's what happened. Following a multi-state investigation, one of the favorite lenders of all car dealerships, known as Santander, just settled the case in Kansas and will have to pay millions of dollars in damages to loan customers. The multi-million dollar settlement resulting from an investigation into the company's lending practices was initiated by the Attorney General's offices in several states. Why was the investigation launched? Consumer complaints were pouring into Attorney General's offices everywhere with complaints about their auto loans. What I've told you is that if a dealer ever lies to you or rips you off that you should file a complaint with your State Attorney General's office, well, it's for this exact reason. When complaints pile up, it pushes them into action. The complaints against Santander should be known to everyone because there's plenty of potential that you were a victim of the same underhanded practice by one of the other banks I mentioned. What was Santander accused of? Well, Santander created very high levels of risk with three underhanded practices. Number one, high loan-to-value ratios. When the loan-to-value ratio is higher than 100%, when the value of your car is worth less than the loan you are signing up for, you're signing up for a problem known as negative equity from day one. Have you heard of cars being upside down, underwater, financially? Loans like this are always a threat to your financial future. Santander was intentionally pushing these high loan-to-value ratio loans and partnering with the dealership to screw over the customer. There are a number of things you can do to make sure that you are never suckered into one of these high loan-to-value ratio loans, but it starts with you understanding just how important it is that you do a few things. First, don't believe the nonsense about zero cash down. Every time your down payment is too small, you open the door to being suckered into a negative equity situation like Santander was doing to their customers. Remember just because the dealer recommends it does not mean it's good for you and just because a bank like Santander is working with them does not mean it's proper either. Second, always go to a dealership with your own bank pre-approval in hand. Some of the customers who signed on with Santander had no idea they were getting blasted with interest rates of 13% or higher. That's ridiculous. And third, get real about your car choice. Choosing a car that's just way out of your league is something you should have known better from the start. And last, don't let them pack your loan full of fees in finance office products. When a bank like Santander partners with a scumbag dealership, they will sell you the farm and then finance every one of your terrible choices. The second thing that Santander was also doing was charging outrageous back-end fees and your bank might have done it to you too. It's called a bank fee or acquisition fee and they can range from a few hundred dollars to as much as three thousand dollars enough to wipe out a lot of your cash down payment. Banks like Santander are just as greedy as the dealership and they're going to rip you if you let them. The third thing Santander was doing was approving high payment to income ratios. Lenders are supposed to set a minimum monthly income to help prevent the total of the car and insurance payments from eating up too much of your monthly income. There are levels of lenders like prime to subprime to deep subprime. They all have standards and most won't allow a customer to sign on for a car payment that exceeds 15 to 20% of their income. There's another standard they should be looking at. You're total debt. I personally am favor of a zero debt to income ratio but banks shouldn't be lending to people if their debt exceeds 50% of their income. Santander had been throwing caution to the win and working with car dealerships to put a customer into a loan with a payment that was way out of line. As I've already pointed out dealers are far from innocent here. You know why they pardoned with banks like Santander because the bank was willing to violate all the reasonable expectations I've already mentioned and it allowed the dealer to thoroughly abuse their customer in the finance office. If you're still going to a dealership without your own financing options in place, make sure you research any banker lender they recommend. Ask about bank fees or acquisition fees and as always don't buy all that nonsense in the finance office. Just say no. Let's wrap. If you finance your last car deal with Santander take a good sharp look at your deal. You might have something coming in the latest multi-million dollar settlement. There were 34 states involved. Yours might be one of them. In the settlement details Santander will pay 65 million in total for certain customers that defaulted on loans between January 1, 2010 and December 31, 2019. For those who have not had their cars repossessed, Santander is required to allow them to keep the car in wave any loan balance up to a total of 45 million dollars in loan forgiveness. I'll leave the link to Santander in the settlement details in the description box below. Alright if you appreciated the video give us a thumbs up and leave a comment down below and do me a favor would you? Include hashtag the Homer guy in your comments below. Share the video on social media with your friends. You're helping to lead the way for need of changes in the car business. If you've watched all the videos on this channel let me know what you've learned. How did you apply the techniques to win on your last car deal and for those of you who like to say thanks with a tip. You can do so at the links right here. Paypal and cash app. They'll be easy to find in the description box down below. And there's zero obligation to do that. Only do it if you feel so inclined. I've helped millions of car buyers with videos, free car time track views and much more and we'll continue to bring you the best car buying advice you can find on YouTube. Thanks everyone. I'm Kevin Hunter. Until next time, take care.