By Alan Zibel
WASHINGTON-- Santander Consumer USA Holdings Inc., a large
player in the subprime auto loan market, agreed to pay nearly $9.4
million to settle federal allegations it improperly repossessed
more than 1,100 vehicles from military members.
Under a settlement filed on Wednesday in U.S. District Court in
Dallas, Santander Consumer settled accusations it violated a
federal law that provides special lending protections to
active-duty military members.
The settlement comes as federal officials push to scrutinize
practices in the auto-lending industry. Santander is the largest
U.S. issuer of bonds backed by loans made to borrowers with poor
credit, according to data from Fitch Ratings.
The Justice Department said Santander improperly completed
repossessions of vehicles owned by military members without
required court orders.
The law, known as the Servicemembers Civil Relief Act, applies
to active-duty military members and covers loans service members
took out before entering the military.
Officials said they learned of Santander's repossession
practices after a service member alleged the lender had repossessed
a military member's car during the night.
The company didn't admit or deny the allegations. A Santander
spokeswoman said the company "cooperated fully" with the
investigation and has improved its loan-servicing practices. The
company said it has set aside reserves for the settlement and
wouldn't need to adjust its financial filings.
Santander and other lenders also faces additional regulatory
scrutiny. The company disclosed last year it received a civil
subpoena from the Justice Department requesting documents about its
subprime loan underwriting and securitization practices, as well as
a similar request from the Securities and Exchange Commission.
Write to Alan Zibel at alan.zibel@wsj.com
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