Immediately drawing applause from the American Financial Services Association, Credit Acceptance announced late on Thursday that a lawsuit involving the Consumer Financial Protection Bureau (CFPB) took a positive turn for the subprime auto finance company.

According to a news release from Credit Acceptance, the CFPB filed an unopposed motion to withdraw from the lawsuit that it initiated jointly on Jan. 4, 2023, with the office of the New York State Attorney General against the finance company in the U.S. District Court for the Southern District of New York.

As of the filing of the CFPB’s motion, Credit Acceptance said its motion to dismiss the case in its entirety remains fully briefed and pending before the court.

Credit Acceptance said the company expects that, if the CFPB’s motion is granted, the New York AG would be the sole remaining plaintiff, and the case would thus be limited to New York consumers only.

As outlined in Credit Acceptance’s motion to dismiss, the finance company said this lawsuit seeks to create new law through litigation and asserts legal theories that conflict with established statutes.

Credit Acceptance said it believes that actions like this harm “hardworking Americans” by targeting companies that offer financing to customers with non-prime or non-existent credit.

“The financing provided by Credit Acceptance and other finance companies through auto dealers is essential to millions of Americans who otherwise would be unable to purchase the cars they need to get to work or school, or obtain quality healthcare or groceries, and otherwise take care of their families,” Credit Acceptance said in the news release.

“The CFPB’s withdrawal would be a significant step toward ensuring that this lawsuit against Credit Acceptance is not used to sidestep the legislative process and impose sweeping regulatory reform,” the finance company continued.

The matter began through an investigation that started in May 2019.

New York attorney general Letitia James and the CFPB said through a news release in January 2023 that they were suing Credit Acceptance “for deceiving thousands of low-income New Yorkers into high-interest car loans.”

According to that news release from the AG and the CFPB, they said Credit Acceptance misstated key terms on contract agreements, including the principal and interest amounts, and did not disclose thousands of dollars in credit charges.

Officials recapped that their investigation found while Credit Acceptance’s contracts in New York claimed an annual percentage rate (APR) of 22.99% or 23.99%, they said they found the finance company charged more than 38% APR on average.

“And on numerous occasions charged more than 100 percent APR,” officials said.

As a result of what officials attributed to the interest rate, the CFPB and the attorney general said nearly 90% of New York contract holders became delinquent on their payments at some point, “often leading to additional fees that added to the cost of their already expensive car loans.

“More than half of New York borrowers failed to repay their loans by the terms of the loan agreements, with 44 percent of New York borrowers experiencing repossession at some point,” officials continued in the news release.

Soon after the suit surfaced, AFSA joined with the Consumer Bankers Association and the U.S. Chamber of Commerce in an amicus brief supporting a motion to dismiss.

As AFSA and others pointed out in an amicus brief written by Troutman Pepper Locke: “The CFPB has overreached from its inception, taking unsupported legal positions, and retroactively changing rules applicable to providers of consumer financial services.”

The associations also pointed to the Truth in Lending Act (TILA) as another reason why this lawsuit did not have merit.

“The Dodd-Frank Act expressly excludes dealerships from the bureau’s rulemaking, enforcement, and supervisory authority, but the bureau attempts to contravene the statute and indirectly regulate an exempted industry by attempting to impose liability on finance companies for the alleged actions of dealerships,” the associations said in that brief. “In addition, neither dealerships nor finance companies are required to disclose dealer discounts under TILA unless separately imposed on consumers.

“Indeed, the implementing regulation for TILA, Regulation Z, and the plain language of the CFPB’s own Official Commentary to Regulation Z, explicitly provide that no such disclosure is required.  Finally, unless a dealer’s violation of TILA is apparent on the face of the TILA disclosure — which plaintiffs do not allege occurred — TILA precludes a dealership’s improper disclosure of the finance charge, even if proven, from being imputed to an indirect vehicle finance company, regardless of the finance company’s involvement in the transaction,” the associations went on to say.

Fast forward to Thursday, and Credit Acceptance is ready to move on from this entire episode.

“We are pleased with the CFPB’s decision to withdraw from this case, which we believe never should have been brought in the first place,” Credit Acceptance chief legal officer Erin Kerber said in the news release. “We are proud to have provided over five million people with the opportunity to own a vehicle through our network of dealers. We look forward to millions more consumers having such an opportunity and remain committed to operating with integrity and in compliance with all applicable laws.”

AFSA president-elect Celia Winslow added in a separate statement, “Continued pursuit of this action would have limited the availability of auto financing and deprived those most in need of financing from being able to acquire the cars they need to get to school and work.”