Credit Acceptance Corporation has agreed to provide $694 million in cash payments and debt relief to resolve allegations brought by a bipartisan group of 41 state attorneys general. The subprime auto lender was accused of approving loans that its own internal calculations indicated were unlikely to be repaid.

The settlement addresses claims about how the company evaluated and financed vehicle purchases for borrowers with limited or damaged credit histories. According to regulators, Credit Acceptance used a proprietary score to estimate how much it expected to collect from all available sources on each loan. Some loans were allegedly approved even when that score predicted the borrower would not repay the principal.

As a result, the states argued that an approval did not necessarily indicate that a borrower could sustainably afford the vehicle. Many consumers later defaulted, had their cars repossessed, and remained subject to collection efforts, according to the allegations.

Settlement payments and debt relief

The agreement includes $60 million in cash restitution for qualifying consumers. It also calls for $388 million in debt to be forgiven for eligible borrowers whose vehicles were repossessed. Another $246 million will be eliminated for qualifying consumers who still have their vehicles.

Credit Acceptance must additionally pay $15 million to the participating attorneys general. Eligible borrowers are expected to be contacted by either the lender or a claims administrator.

Alleged add-on sales practices

The states also accused Credit Acceptance of encouraging dealers to include vehicle service contracts and GAP coverage in loan agreements, or of failing to stop those practices. Some consumers allegedly were unaware that they had purchased the products, while others were allegedly told the add-ons were necessary to receive financing.

Required changes to lending practices

Under the agreement, Credit Acceptance will have to provide clearer warnings concerning default risks and vehicle values. The company will also face tighter monitoring of add-on product sales.

The settlement includes a seven-year limit on certain vehicle prices, capping them at 109 percent of retail book value. Qualifying borrowers whose particularly risky loans fail quickly may also receive debt relief equal to 95 percent of the balance.

The agreement takes effect on November 2, 2026. Credit Acceptance had not responded to a request for comment when Reuters reported on the settlement.