Massachusetts auto lender agrees to pay $5.5 million to resolve claims it failed to provide compliant deficiency notices

Another auto lender recently agreed to pay millions of dollars to resolve allegations by the Massachusetts Attorney General’s office that it failed to provide compliant notices of deficiency following auto repossessions by Commonwealth consumers.

A copy of the Termination Insurance entered into by Santander Consumer USA Inc. can be found here: Link to Termination Insurance.

Santander Consumer USA Inc. has agreed to pay more than $5.5 million to end an attorney general’s investigation that it failed to provide post-repossession deficiency notices based on fair value marketer of vehicles sold at auction.

This settlement follows the record settlement between Credit Acceptance Corp. and the Commonwealth of Massachusetts, where Credit Acceptance agreed to pay $27 million to resolve similar allegations that it failed to provide notices of deficiency based on a vehicle’s fair market value.

These settlements are made by the groundbreaking decision of the Massachusetts Supreme Judicial Court in Williams v. Am. Honda Finance Corporation, 479 Mass. 656 (2018), where the SJC held that auto lenders “must expressly describe the deficit as the difference between the amount owed on the loan and the fair market value of the vehicle, not the difference between the amount owed and the proceeds of the sale .” Williams, 479 mass on pages 657-658.

Significantly, it is now settled law that detention in williams applies retroactively, i.e. williams applies to all notices sent before williams has been decided. See, for example, Dellorusso vs. PNC Bank, NA, 98 Mass. App. 84 (2020).

As the court noted in Dellorusso, there is “no compelling reason why [a lender] should receive more favorable treatment in exchange for the risk it took than the American Honda Finance Corporation []simply because the case of the American Honda was decided first[.]” Dellorusso, 98 Mass. App. At 88 years old.

The settlement amounts are so large because a violation of general estate laws c. 255B, § 20B, the statute regulating post-repossession procedures/notice, constitutes an unfair trade practice in violation of the general laws of mass c. 93A (Unfair and Deceptive Trade Practices Act of Massachusetts), exposing lenders to treble damages.

This regulation is another reminder that auto lenders doing business in Massachusetts must ensure that their post-repossession notices comply with the williams and refer to the fair market value of the repossessed vehicle, not the auction price.

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