Judge puts US, New York predatory lending lawsuit against Credit Acceptance on hold

Credit Acceptance

07/08/2023 23:23

By Jonathan Stempel
       NEW YORK, Aug 7 (Reuters) - A federal judge on Monday
put on hold a predatory lending lawsuit against Credit
Acceptance Corp  CACC.O  by the U.S. Consumer Financial
Protection Bureau and New York Attorney General Letitia James,
over objections from both regulators.
    In staying the lawsuit, U.S. District Judge Jennifer Rearden
in Manhattan cited a separate case before the U.S. Supreme Court
over whether the CFPB's funding mechanism is constitutional.
    A ruling against the CFPB could imperil actions by the
consumer watchdog since it was created as part of the Dodd-Frank
Act in 2010, in response to the global financial crisis.
    The CFPB and James accused Credit Acceptance of driving
low-income borrowers into used-car loans it knew they could not
afford, with interest rates averaging 22%, and concealing the
true cost of borrowing.
    In one alleged instance, Credit Acceptance approved a
$260-a-month loan for a mother of two who made just $950 per
month, and whose vehicle ended up being repossessed twice.
    The regulators argued that the CFPB's funding status had no
bearing on whether their lawsuit could proceed.
    But the judge said that while the public had an interest in
seeing consumer protection laws enforced, "any potential harm to
the public caused by delaying this action is outweighed by the
benefit to consumers in proceeding in a streamlined fashion."
    The CFPB declined to comment. James' office did not
immediately respond to requests for comment.
    A Supreme Court decision in the funding case is expected by
next June.
    Last December, another judge cited that case in staying a
lawsuit by the CFPB and James against MoneyGram International
over remittance transfers, which let people in the United States
send money to family and friends elsewhere.
    The case is Consumer Financial Protection Bureau et al v
Credit Acceptance Corp, U.S. District Court, Southern District
of New York, No. 23-00038.

 (Reporting by Jonathan Stempel in New York; Editing by David
Gregorio)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))