BOSTON and SOUTHFIELD, Mich. -

Both a large subprime auto finance company and a state attorney general seemed pleased to announce a settlement between them that is involving more than $27 million.

On Wednesday, Credit Acceptance became the fifth different finance company to finalize a settlement with the Massachusetts attorney general during the past five years.

According to a news release from Massachusetts AG Maura Healey, Credit Acceptance Corporation will pay more than $27 million to settle a lawsuit over what the commonwealth’s top enforcement official described as “a variety of alleged unfair practices relating to the company’s role in the origination, collection, and securitization of subprime auto loans.”

The settlement, which was filed on Wednesday in Suffolk Superior Court, requires Credit Acceptance to pay a total of $27.2 million, and provide debt relief and credit repair to thousands of Massachusetts consumers. The attorney general estimated more than 3,000 consumers across the state are expected to be eligible for settlement funds, including many residents of marginalized communities in Springfield, Boston, Worcester and Brockton.

The settlement also requires Credit Acceptance to make changes to its contract handling practices. 

Credit Acceptance made this statement after Wednesday’s settlement stemming from the lawsuit first acknowledged by the finance company last summer.

“This matter was vigorously contested. However, Credit Acceptance believes it to be in the best interest of the company to conclude this litigation, and is pleased to announce its resolution,” the company said.

“The company looks forward to continuing to serve customers in the Commonwealth of Massachusetts through its financing programs,” Credit Acceptance went on to say.

The Massachusetts attorney general’s office recapped that it sued Credit Acceptance last August over the company’s practices relating to the origination, collection and securitization of subprime paper.

Specifically, the lawsuit alleged that Credit Acceptance made high-interest retail installment contracts “that it knew or should have known many borrowers would be unable to repay.” The AG’s lawsuit noted that while the company profited from these contracts, borrowers experienced credit harm, and, in some instances, lost their vehicles or down payments.

The complaint also alleged that some Credit Acceptance customers were subject to hidden finance charges, which resulted in violations of the state’s 21% usury cap and that Credit Acceptance engaged in unlawful collection practices.

Furthermore, the AG’s lawsuit also contained allegations that Credit Acceptance failed to inform investors that it topped off securitization pools with higher-risk paper. 

The settlement with the Massachusetts attorney general contains the highest dollar figure yet within automotive. It’s all what Healey said was her office’s “ongoing industry-wide review of securitization practices in the subprime auto loan market,” through actions that now have surpassed $60 million.

Last year, the Massachusetts attorney general reached a $5.5 million settlement with Exeter Finance.

In 2017, Healey secured a similar settlement with Santander requiring the company to pay $22 million and provide more than $7 million in debt relief to Massachusetts consumers.

And in 2016, American Credit Acceptance and Westlake Financial Services agreed to settlements involving a total of $7.4 million.

In the news release announcing the actions against Credit Acceptance, Healey reiterated why her office is taking this enforcement course.

“Thousands of Massachusetts consumers, many of them first-time car buyers, put their faith in CAC to help them with an auto loan, but were instead lured into high-cost loans, fell deeper in debt, and even lost their vehicles,” Healey said. “With this significant $27 million settlement, eligible Massachusetts drivers who have been suffering under the weight of a crushing car loan due to CAC’s deceptive practices will be able to receive relief and avoid new defaults.

“Predatory car loans, like predatory student loans or mortgages, hurt families and communities. Through our ongoing, extensive investigation into the subprime auto industry, we have a proven record of taking action and getting results for our residents who have been exploited by unscrupulous lenders,” she went on to say.