A company that sold a gap insurance product as an add-on to its auto loan products will pay restitution and a civil money penalty over deceptive practices in its product marketing and misrepresentation of the impact of loan extensions, according to a consent order entered into with the federal consumer bureau and announced Tuesday.
The Bureau of Consumer Financial Protection (BCFP, formerly known as CFPB) said it has settled with Santander Consumer USA Inc.,a consumer financial services company based in Dallas, Texas. The consent order, signed by the bureau’s acting director Monday, provides that Santander will pay $9.29 million in restitution to the approximately 3,493 accounts of affected consumers. The restitution will consist of approximately $1,980,873 in payments by check and $7,312,953 in statement credits.
Additionally, the order says Santander will pay a $2.5 million civil money penalty over its misrepresentations regarding loan extensions.
The order, noting findings related to the company’s gap product, says the product was subject to a loan-to-value (LTV) of 125%. “If, at the time of purchase, the consumer’s loan exceeded 125% of the vehicle’s value – a value determined by the smallest of three potential values – Respondent would exclude that difference from any S-GUARD GAP proceeds,” the order says, using the product name.
“In those situations, Respondent’s S-GUARD GAP may not cover the consumer’s outstanding auto loan balance in the event that a consumer suffered a total loss of his or her vehicle and the consumer’s primary auto insurance was insufficient to cover the entire outstanding loan balance,” it says. It adds that Santander did not tell its gap product consumers “at any time whether the LTV limitation applied to them.”
It says that from at least April 1, 2012, Santander sold its S-GUARD GAP to approximately 44,180 consumers with LTVs above 125% at the time of the vehicle purchase.