Attorney General Bonta Joins Nationwide Bipartisan Settlement with Subprime Auto Lender, Returns $6.86 Million in Restitution and Debt Relief to Affected California Consumers

OAKLAND — California Attorney General Rob Bonta today joined a coalition of 40 attorneys general in announcing a settlement with Credit Acceptance Corporation (CAC), one of the nation’s largest auto finance companies, resolving allegations that CAC engaged in unlawful business practices, including originating auto loans it knew were likely to default. Today’s settlement, which is subject to court approval, provides $694 million in cash and debt relief to consumers across the country in connection with their car loans. While CAC did most of its business in states outside of California, affected California consumers will receive an estimated $1.46 million in restitution and $5.4 million in debt relief. The settlement also resolves a lawsuit initially filed by the Consumer Financial Protection Bureau (CFPB) and the New York Attorney General, but ultimately abandoned by the Trump Administration, underscoring the commitment of attorneys general to protect consumers abandoned by the federal government. Today’s settlement includes injunctive terms that, among other things, require CAC to provide consumers disclosures about loan risks, give consumers protections from bad outcomes from certain risky CAC loans, and help guard consumers from dealers deceptively packing CAC auto-loan contracts with unwanted and expensive add-ons, such as service contracts.

“Credit Acceptance Corporation closed its eyes to deceptive origination practices and made predatory, high-cost auto loans that were likely to result in repossession and leave consumers trapped in a cycle of debt. Like other dangerous and defective products, these loans were unfair and abusive, and therefore unlawful in California," said Attorney General Bonta. “Today’s bipartisan settlement returns millions to affected California consumers and is a testament to states banding together to protect consumers from financial exploitation amid inaction by the federal government.”

Consumers eligible to receive restitution or debt relief from this settlement have already been identified, will be notified, and do not need to take action.

CAC provides high-interest car loans to consumers with limited or impaired credit histories. The multistate settlement resolves allegations that CAC originated loans that the company knew or should have known consumers could not afford. CAC gives a proprietary score to each of its loans representing its prediction of the percentage amount CAC will collect on the loan from all sources. The attorneys general allege that consumers could not reasonably afford many of CAC’s low score loans, including those where CAC predicted the consumer would not pay back even the loan’s principal loan amount. Unsurprisingly, many of those low score loans resulted in consumers defaulting on their loans and losing their cars when they were repossessed and sold at auction.

The settlement also resolves allegations that CAC encouraged and failed to reasonably prevent dealers from unlawfully packing CAC auto-loan contracts with unwanted Vehicle Service Contracts (VSC) and Guaranteed Asset Protection (GAP) products. This lack of reasonable dealer oversight hurt consumers and resulted in dealers aggressively selling VSCs and GAP products in connection with CAC loans when consumers were either unaware they were purchasing the products or were led to believe the products had to be purchased for the consumer to get financing.

The settlement provides $60 million in cash restitution that will be distributed to consumers to whom CAC gave particularly risky loans. For certain risky CAC loans made between November 1, 2015, and November 30, 2025, CAC is also required to provide, on or before November 2, 2026, $388,000,000 in debt relief to consumers whose cars have been repossessed, and $246,000,000 in debt relief to consumers whose cars have not been repossessed, allowing those consumers to keep their cars. CAC must also pay an additional $15 million to the attorneys general, with $574,000 going to California.

The settlement’s injunctive terms include the following requirements designed to meaningfully reform the company’s lending practices:

• For consumers with certain risky CAC loans that CAC made starting in December 2025, CAC will provide “off ramps” for loans that fail quickly. Qualifying consumers will get 95% debt relief, and CAC is prohibited from filing collections lawsuits against them. CAC must provide these off ramps for a five-year period starting on November 2, 2026.
• The settlement mandates a process to prevent unlawful VSC and GAP product packing, including enhanced pre-purchase disclosures, a post-purchase process alerting consumers about the purchase(s) and allowing easier product cancelation, and dealer monitoring.
• CAC must provide consumers with pre-loan disclosures about the risks of default and the value of the vehicle.
• For seven years, CAC must institute a price cap for vehicle prices at 109% of retail book value for certain consumers.
• CAC must implement processes to prevent dealers from raising car prices due to creditworthiness or above advertised prices.

In securing this settlement, Attorney General Bonta joins the attorneys general of Maryland, Arkansas, Illinois, Minnesota, New Jersey, Alabama, Alaska, Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaiʻi, Indiana, Kentucky, Louisiana, Maine, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, and Wisconsin. New York is concurrently settling litigation it brought against CAC in the U.S District Court for the Southern District of New York. 

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