D.C. residents who financed cars through one of the nation’s largest subprime auto lenders will receive more than $250,000 in restitution after authorities accused the company of approving loans it knew some borrowers could not afford and then collecting payments even as customers defaulted and lost their vehicles.
Attorney General Brian L. Schwalb announced that the District joined 40 states in a $694 million settlement with Credit Acceptance Corporation, a Michigan-based auto finance company specializing in lending to consumers with limited or damaged credit histories. Credit Acceptance will also pay the District more than $130,000 in penalties and legal fees.
“Credit Acceptance Corporation set car buyers up to fail by making loans it knew they would never be able to afford, and by allowing dealers to inflate the cost of financing agreements with hidden add-ons,” Schwalb said. “As a result, the company profited, even while customers lost their cars and continued to struggle with debt.”
The allegations center on a lending system that state attorneys general say enabled Credit Acceptance to calculate the likelihood of borrowers defaulting before financing their vehicles.
Credit Acceptance assigns a proprietary score to its loans that predicts the percentage of money it expects to collect. Authorities alleged that, in some cases, the company made loans even when its own calculations predicted that borrowers would not repay the principal, let alone the interest. Many borrowers eventually defaulted; their cars were repossessed and sold, and their already damaged credit histories suffered further, the states said.
Minnesota Attorney General Keith Ellison, whose office led the case, said the company’s own analysis showed what was likely to happen to certain borrowers.
“Credit Acceptance Corporation engaged in a vicious cycle of lending to consumers who could not afford their payments, collecting what it could, and then repossessing and reselling the car in an endless, fraudulent cycle,” Ellison said.
Credit Acceptance did not admit fault or wrongdoing. The company said the agreement resolves a multistate investigation that began in 2020 and litigation filed by New York in 2023. Credit Acceptance said the resolution provides greater clarity on regulatory expectations and “does not require material changes” to its operations.
The settlement provides $60 million in nationwide cash restitution to consumers who received particularly risky loans. Credit Acceptance must provide an additional $388 million in debt relief to qualifying consumers whose vehicles were repossessed and $246 million to borrowers who still have their vehicles, allowing them to keep their cars. These provisions cover certain loans made between Nov. 1, 2015, and Nov. 30, 2025. The company must also pay $15 million to the participating attorneys general.
New Jersey Attorney General Jennifer Davenport said that access to a vehicle can determine whether families can get to work, take children to school, and maintain financial stability.
“But when car payments become unaffordable, that stability turns into a spiral of debt and financial distress,” Davenport said.
Investigators also accused Credit Acceptance of encouraging or failing to adequately prevent dealers in its network from adding vehicle service contracts and Guaranteed Asset Protection (commonly known as GAP products) to financing agreements.
According to the states, some consumers did not realize they were buying the products. Others were allegedly told or led to believe they needed to buy the add-ons to obtain financing. Authorities said Credit Acceptance’s dealer compensation system and insufficient oversight encouraged aggressive sales.
Connecticut Attorney General William Tong said the consequences went far beyond a monthly car payment.
“CAC profited off risky loans destined to fail, padded with worthless services and so-called protections,” Tong said. “Their irresponsible business practices and ruthless repossession and collection practices destroyed consumer finances.”
The agreement requires Credit Acceptance to change how it handles certain high-risk loans. For qualifying loans made beginning in December 2025 that default quickly, consumers will be eligible for 95% debt relief, and the company will be barred from filing collection lawsuits. Those protections take effect Nov. 2 and must remain available for five years.
Consumers must also receive information before taking out a loan about the risk of default and the vehicle’s value. For seven years, Credit Acceptance must cap vehicle prices at 109% of retail book value for certain consumers and establish procedures to prevent dealers from increasing prices based on a customer’s creditworthiness or from charging more than the advertised price.
The company must strengthen safeguards for vehicle service contracts and GAP products, including pre-purchase disclosures, post-purchase notifications that tell consumers what they bought, a process that makes it easier to cancel the products, and additional dealer monitoring.
Illinois Attorney General Kwame Raoul, another member of the six-state executive committee that negotiated the agreement, said the case involved thousands of consumers.
“Credit Acceptance Corporation’s predatory lending practices harmed thousands of consumers,” Raoul said. “I am pleased that this settlement holds CAC accountable and requires that the company make fundamental changes to its business practices.”
The settlement follows federal regulators’ abandonment of their case against Credit Acceptance. The Consumer Financial Protection Bureau and New York sued the company in 2023 over its lending practices, but the CFPB permanently dropped its case in 2025. New York continued its litigation and is now resolving that case separately under the agreement.
A claims administrator will contact District consumers eligible for restitution, and Credit Acceptance will notify customers who qualify for debt relief.
Schwalb said the agreement will return money to District residents while imposing protections to prevent similar lending practices.
“This resolution puts hundreds of thousands of dollars back into the pockets of DC residents who were taken advantage of,” Schwalb said, “and requires CAC to change its business model to make sure customers are protected moving forward.”
