New York’s Department of Financial Services fined Santander Consumer USA $400,000 and ordered more than $275,000 in restitution after finding the lender charged auto loan borrowers a monthly extension fee it never disclosed.
DFS Acting Superintendent Kaitlin Asrow announced the settlement, which resolves an enforcement investigation into how the company handled payment extensions on indirect automobile loans.
Like many lenders, Santander Consumer let borrowers request more time to make payments and provided them with an Extension Agreement spelling out the cost. That agreement disclosed a single $25 extension fee. In practice, according to the Department, the company charged borrowers $25 per month.
New York Banking Law prohibits licensed lenders from publishing or distributing any statement about the rates, terms, or conditions of a loan that is false, misleading, or deceptive..
Santander Consumer voluntarily stopped charging the undisclosed fees in May 2017, before the Department’s examination of its 2016 through 2018 New York lending activity. Even so, the practice cost New York borrowers roughly $237,000 in fees that were paid. The company assessed, but did not collect, another $86,000 from other borrowers in the state.
The settlement requires Santander Consumer to make all eligible impacted borrowers whole. Borrowers who paid the fees will receive refund checks plus interest calculated under the Consumer Price Index. Borrowers who were assessed but never paid will have those charges waived. The waivers are due within 30 days of the order, and refund checks must be mailed within three months. Eligible borrowers are New York consumers charged or assessed an undisclosed extension fee between February 19, 2016, and May 10, 2017, whose fees were not previously waived.
“The Department is committed to holding institutions accountable for essential consumer safeguards under New York Law,” Asrow said. “Today’s settlement puts money back in the pocket of New Yorkers for clear violations.”
The Department credited the company’s cooperation during the investigation and its work to identify and voluntarily remediate the problem. Santander Consumer must report back after one year on how many restitution checks were mailed, how many went uncashed, and how many had to be reissued.
