State reaches settlement with Credit Acceptance Corp. over predatory auto loans

HONOLULU (HawaiiNewsNow) – The state announced a settlement with Credit Acceptance Corporation (CAC) over allegations the company issued auto loans it knew borrowers could not afford.

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If approved by the court, eligible Hawaii consumers will split nearly $830,000 in debt forgiveness and $115,000 in cash restitution.

The Hawaii Department of Commerce and Consumer Affairs’ Office of Consumer Protections (OCP) said the settlement includes injunctive terms requiring CAC to disclose loan risks and protect buyers from predatory terms. It also bars CAC from “packing” vehicle financing contracts with unwanted add-ons, such as Vehicle Service Contracts and Guaranteed Asset Protection.

The OCP said CAC assigned each loan a proprietary score predicting what percentage of the balance it would ultimately collect from all sources. State officials alleged borrowers could not reasonably afford many of these low-score loans, including instances where CAC predicted buyers would fail to repay even the principal balance.

“Making high‑risk loans a lender knows a borrower cannot reasonably afford predictably leads to bad outcomes for borrowers and lenders,” said Mana Moriarty, OCP executive director. “This settlement provides cash to affected borrowers, removes the threat of collection lawsuits and removes negative items from borrowers’ credit reports.”

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Hawaii’s agreement is part of a nationwide settlement between CAC, the OCP, and attorneys general across 40 other states. Pending court approvals, the national agreement provides up to $60 million in cash restitution to affected borrowers, up to $15 million to settling states, and up to $634 million in debt forgiveness.

Hawaii is expected to receive an additional $112,000 to fund future consumer protection and education initiatives.

The settlement imposes several reforms on CAC’s lending practices:

State officials said the consent judgment requires CAC to contact eligible consumers directly. Anyone with questions about their eligibility can reach out to CAC’s customer service number at 800-634-1506, or contact the independent claims administrator once the agreement receives final court approval.

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