In the spring of 2020, nearly three dozen state attorneys general announced a significant legal settlement with the country’s largest subprime auto lender. The lender, Santander Consumer USA, was alleged to have issued high-interest loans to borrowers unable to afford them, and had subsequently allowed the borrowers to defer their payments without informing them of the high costs involved. This policy led to borrowers accruing thousands of dollars in unexpected interest charges, often resulting in the repossession of their vehicles.
Pennsylvania’s attorney general at the time, Josh Shapiro, highlighted the similarities between these practices and those that contributed to the 2008 financial crisis. The settlement, designed to provide consumer protections and clarify extension policies, did not include any admission of wrongdoing from Santander. It was described by the bank as resolving an issue related to past underwriting practices.
However, as these state officials celebrated their regulatory success, comparable consumer complaints emerged concerning Exeter Finance, another auto lender. This institution was managed by former Santander executives who had left amid regulatory scrutiny. By 2020, Exeter’s leadership largely comprised individuals who were previously overseeing Santander during the period when it was accused of misleading practices.
Regrettably, the approach towards Exeter by attorneys general was noticeably lax. As revealed by a ProPublica investigation, in the 12 states involved in the Santander settlement, little to no action has been taken against Exeter despite numerous similar allegations. ProPublica reviewed about 200 consumer complaints from the past five years, discovering that state regulators rarely challenged Exeter’s questionable loan practices.
In some states, such as Washington, authorities attempted voluntary mediation with Exeter but closed the case when the company failed to respond. New Jersey simply redirected complaints to Texas, where Exeter is based, without taking further steps. Kentucky delayed action on a complaint until after the borrower’s vehicle was repossessed.
While some attorneys general avoided commenting on the investigation, others, like Pennsylvania, Georgia, and California, did not provide documents in response to public records requests. Attorney Prentiss Cox from the University of Minnesota noted that the limited resources often restrict what state attorneys general can pursue, a reality known and exploited by companies like Exeter.
Exeter is under more recent scrutiny, as Georgia has confirmed an investigation, and Louisiana hinted at possible actions following ProPublica’s previous exposé. The state attorneys general serve as one of the few regulatory checks against the expansive auto lending market, especially as many car loan contracts mandate arbitration, limiting borrowers’ legal recourse.
Exeter defends its business strategy, claiming compliance with all legal standards and that extensions help customers retain their vehicles. However, ProPublica’s findings suggest otherwise: that these deferments often trap borrowers in greater debt and can lead to repossessions despite having paid back more than their initial loan amounts.
Exeter has grown into a major industry player with significant outstanding loans. The company’s business model involves multiple extensions, adding substantial interest costs. When contacted for comment, Exeter’s executives either declined or did not respond. In written statements, the company reaffirmed that its practices are legally compliant but did not specify which regulatory bodies reviewed its procedures.
The article further documents individual cases where consumers faced challenges due to Exeter’s actions. In one example, a Kentucky resident lost her vehicle after Exeter granted several extensions without adequately explaining the further interest costs.
As enforcement on Exeter remains weak, attorneys general’s actions against the lender show inconsistency. Some states did not even engage directly with Exeter on complaints. Observers suggest these actions fall short of the more robust enforcement seen with different financial institutions like Santander.
Many believe that a robust and active regulatory presence is necessary to protect consumers from such lending practices. As yet, Exeter’s operations continue without the substantial oversight that might be expected following the revelations and settlements with Santander.