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Healey spokeswoman Emalie Gainey said Massachusetts law prohibits making a loan subject to a service contract. CAC’s internal policy treated service contracts as optional for vehicle loans, according to the dispute.
But auto dealers have told customers the contracts are mandatory for CAC loans, according to Massachusetts’ 2020 complaint against the lender. The Commonwealth alleged that the CAC had conducted cursory investigations into client reports describing such conversations and offered little justification for dismissing client accounts.
The lawsuit also accused the CAC of violating its own policy by failing to examine whether the high sales rates of vehicle service contracts reflected dealerships presenting the contracts as binding.
“From 2013 to 2019, many Massachusetts dealerships had very high VSC penetration rates, ranging from 90% to 100% of their CAC loans,†the Commonwealth wrote in the complaint.
The CAC said on September 1 that the lawsuit had been “vigorously contested” and that the company had not admitted any wrongdoing or liability under the settlement.
“However, Credit Acceptance believes it is in the best interests of the company to conclude this litigation and is happy to announce its resolution,” CAC wrote in a press release.
Busk said that given the dismissal of the litigation and its replacement by the settlement, he did not think it was appropriate to comment on the allegations. However, he confirmed that vehicle maintenance contracts were optional and said “it is disclosed to the consumer”. He said that was the case before the settlement.
“It is not a question of whether they are optional or not,” he said.
Requiring a service contract as a condition of a loan is a financial burden, according to the Massachusetts lawsuit. This means that CAC loans would exceed the Commonwealth’s 21% interest rate threshold.
Massachusetts resellers could find consumers canceling CAC service contracts – the regulations also require the company, within seven days of the loan, to remind consumers that the service contract can be canceled for a refund.
“If the customer chooses to cancel the VSC within the first 30 days from the contract date, CAC will reduce the account balance to reflect the cancellation of the VSC and will recalculate the monthly payments based on the term and rate. ‘original interest and reduced account balance, “says the settlement.
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