New York Attorney General Letitia James filed a lawsuit Wednesday against Credit Acceptance Corporation, a subprime auto lending giant she says makes its business model out of lying to and ripping off New Yorkers buying used cars.
CAC markets itself as an alternative to traditional lenders, a bridge for low-income individuals to buy a car and build up asset-based wealth. Between 2015 and 2021, the income of the median borrower nationwide was about $35,000.
Dealerships must also utilize CAC’s proprietary software to create the loan contract, which the plaintiffs say is manipulated by dealers to incorporate the cost of the loan and inflate the price of the car well beyond what it’s worth — locking buyers into mountains of debt for a comparatively worthless asset.
The plaintiffs say CAC knows from the get-go that a substantial portion of its client base will default, with its proprietary algorithm projecting 25% of New York loans would not be fully paid off, but the company does not vet customers’ credit because it can still make money through default judgments and repossession.
James says that practice is in violation of the state’s Martin Act, a 1921 statute giving the AG broad authority to prosecute financial fraud perpetrated against shareholders.
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