Subprime auto lender Credit Acceptance Corp. has received a subpoena from the Maryland attorney general regarding its repossession and sales policies.
The company reports it is cooperating with the investigation and is in the process of providing the information requested. The company received the subpoena in March, according to its annual report.
Maryland is believed to be the fifth government body since late 2014 to launch an investigation into Credit Acceptance’s practices. The other investigative notices, including one from the U.S. Justice Department and another from the Federal Trade Commission, are related to its origination and lending practices. It has faced no penalties or charges connected with those probes to date, according to Credit Acceptance’s CEO Brett Roberts.
Subprime auto lenders have issued record volumes of new loans to riskier borrowers in recent years. Some of the loans are showing signs of stress as more borrowers with iffy credit are failing - for example - to make monthly car payments on time, a worry for investors who have snapped up billions of dollars of securities backed by risky auto debt. Delinquencies on subprime auto loans packaged into bonds rose in January to 4.7%, a level not seen since 2010, according to data from Wells Fargo & Co.
Credit Acceptance officials were not immediately available for comment.
The signs of loan stress have attracted more regulatory scrutiny. In October, the Consumer Financial Protection Bureau required Westlake Financial Services, a competitor of Credit Acceptance, to pay $44 million in consumer relief after finding that its debt collection tactics were illegal, the CFPB said.
Westlake and Wilshire Consumer Credit allegedly deceived consumers by calling under false pretenses and using phony caller ID information, falsely threatened to refer borrowers for investigation or criminal prosecution and illegally disclosed information about debts to borrowers’ employers, friends and family.
The CFPB found that Westlake and Wilshire deceived borrowers into believing they were being called by repossession companies, other third parties or even the borrowers’ own family and friends. The CFPB’s investigation found that the companies’ debt collectors used a web-based service, Skip Tracy, to place outgoing calls and choose the phone number and caller ID text that the call recipient would see.