There are just some people who can’t afford a car. That is a real problem in America where most people need a car to get to work. To some extent it’s a societal problem where we don’t allow the predatory lending needed to make it worthwhile selling someone with terrible credit a car but we don’t give people an option to not own a car.
I disagree with much of what you said but i have issues with this purchaser. So many stories about sup-prime purchasers being in trouble involve used trucks or even new trucks. NO ONE NEEDS A TRUCK*. Trucks and SUVs cost way more to buy and way more to operate than a sedan. A used Toyota Corolla might not be fun but those things are reliable since Toyota waits an extra generation before putting new tech/engines/transmissions in their vehicles. Then everything cost less. Tires - 50+% less, oil change - 75% less and MPG probably double a truck. Its the same deal with new parts for repairs. You might not be financially literate but you have to know a 21k truck is gonna cost more than a 10k used Corolla.
*A few people need a personal truck for work. Not many though.
Exactly. He put $4000 cash down. If he needed a car to get to work, he could have purchased a used civic and not owe a penny. He had shitty credit and made a horrible financial decision, because he wanted a newer truck beyond his means.
The fact that the article uses that as their smoking gun speaks volumes.
I hate these crazy high interest rates being charged, but I also don’t understand the fine. Santander filled a market void fo subprime lending. Obviously your credit is pegged to the interest rate you end up getting. If we’re going to fine Santander here, then lets do away with the credit system altogether.
If Santander had not offered lending to these people, what would their alternative have been? Either another subprime lender doing the exact same thing, or they just wouldn’t have a car because odds are someone with such poor credit wouldn’t have direct access to a large sum of cash with which to purchase outright.
If we’re going to fine bad lending practices, that focus should be on orgs doing payday lending, not subprime lending. Also, allowing these folks to get the title to their vehicle if they defaulted is also actually giving them a windfall on this entire deal, which feels unfair as well.
It wasn’t just the subprime lending, Capital One does that too. It was the knowing falsification of income and issuing loans with no believe that the person could pay them off. Admittedly it’s a close call, where do you draw the line? Should we let mob loansharks operate at 100% interest? But this is not very different from pay day lending, they were writing a loan that they knew the borrower wasn’t able to lay back.
I can absolutely understand the falsification part. I guess my question is what the alternative is. As a business, obviously they want profits, and they chose to bend (read: break) rules they can to achieve that by messing with incomes. However, shouldn’t there be some accountability on the part of the people who signed up for this. It’s not like these folks didn’t see their income being inflated to make up for their bad credit.
As I think through this, I can get comfortable with the fine because Santander did something wrong for sure, but it’s the granting of titles to defaulters that I have an issue with. Does this not embolden subprime borrowers to try and pursue more risky loans if they feel they could just sue or file grievances with the government for redress?
Just seems like accountability should go both ways.
They’re not being fined for sub-prime lending practices but “predatory” lending practices.
If you go thru the article you can see how they failed at institutional control to stop fake income loans, & their employees were paid by putting once repossessed car back in borrower’s hands with additional repo fees, knowing they can’t pay either & the loan was fake which resulted in multiple repossession of the same car.
This is the practice where they were feeding on the financial desperation of these people & are being fined for
This is the reason for giving them the title of defaulting on the loan.
But where is the accountability for the people. I worked as a salesman at a car dealership for like 6 months back in 2013, and I saw a nurse bringing in around $50K sign for a used Mercedes E Class at around 65K with almost 17% interest due to a high 500s credit score. Not sure if that was Santander, but that nurse obviously saw his credit score, saw his interest rates, saw the payment, and saw the cost of the vehicle and still signed.
If the bank in that instance inflated his income, fine them, but there’s a conscious decision being made on the part of the subprime consumer to pull the trigger on the deal.
First Scenario - let’s say a borrower knowingly/ignorantly signs a subprime auto loan & defaults, the Accountability for the borrower comes from repossession of the car & credit hit.
Second Scenario - borrower needs a car, “dealer” falsifies the credit app & Santander knowingly ignores lack of control over lending verification procedures & approves the loan, borrower acknowledges the high rate & payment but doesn’t know about false credit app, signs, defaults, gets car repossessed, Santander comes & knows the loan was false, borrower can’t repay but “works” with borrower, charges fees & gives car back & the same cycle repeats multiple times. Santander had the chance to cut the losses but they didn’t.
I understand the scenarios, but even in the second one, it’s on the borrower to understand the most basic terms of the contract: the payment and interest. The car only gets repossessed if the payments aren’t made.
I am totally in favor of fining the crap out of the bank for trying to game the system and cheat, but why are we rewarding a borrower who saw a number on a page, decided yea I can pay that, decided he wasn’t going to or couldn’t pay it, decided let’s do this all over again, and now gets title to the car?
I feel the better avenue would have been rescission of the contract. Their credit score will update in a few months and reflect a new reality where this entire ordeal never takes place.
But these poor, innocent people need a vehicle to get to work! Are you suggesting that the bank should take that away from them? What will they do?
Obviously, I’m being a bit facetious here, but we can either make people responsible for their own financial decisions or dictate everything for them and they’ll never learn. One of those actually helps people grow.
As much as I hate these companies, you can’t not blame the customers too. Being poor doesn’t mean you have to be stupid. I recently reviewed a bank statement where this guy was hit with 8 nsf on $2 charges at 7-11
But the debate is not sub-prime lending & not holding people responsible for their bad financial decisions. I have said before that one should not be not held accountable for the bad decision thus the repossession & credit hit in scenario 1 above.
The issue with Santander was they purposefully allowed “fake” loans, knowingly gave cars back to same ppl, charged additional fees & did it multiple times.
The more I think about this the more trouble i have deciding where the line should be or that the government should set the line.
What I don’t have trouble believing is that this sort of hyper risky behavior cannot be bailed out by taxpayers. If banks want to do this you can argue they should be allowed to but I think we need strong regulations that assure when these loans go south they dont bring down a too big to fail bank and require a government bail out.
I understand a lot of sentiment for the signer who should bear responsibility also.
But I’ve seen so much shit loans through my line of work and realizing a few other things in life
A lot of people in subprime are not educated about finances at all
they are being told everywhere they suck and should just eat crap for APR, fees, etc
many just plainly can’t say NO to hard-sell tactics
many caught in the cycle of keeping up with the Jones
Even when I can to US I had no understanding of how to manage credit and made shit ton of bad decisions.
And ever I have hard times educating my own parents let alone strangers.
But the lack of education is also a problem. They are in the catch-22 trying to make money to pay off debts that are designed on purpose not to be repaid. They have no time for education and seeing that as a never-ending road.
So for all the shit that Santander has done I think giving free titles is at least that could be done.
Should have forced Wells Fargo into the same shit a couple of years ago when their shenanigans with add-ons to car loans came up.
I don’t have a problem with sub prime lenders, it’s just part of the business. What I do have a problem with is companies that behave like Santander, if they were shut down for their practices or fined out of existence and made of example of, that would be a positive step forward. Fraud and predatory lending are allot different than a dealer making profit on an uneducated customer.
I don’t think anyone is saying fraud is ok. I specifically stated that they should face the consequences for any fraudulent behavior.
I think the issue is that the line between subprime lending and predatory lending is very, very blurry. Having expose articles that tout example of predatory lending by talking about someone buying a truck WAY beyond their means and knowingly signing for it doesn’t help at all either.
Yes, but the article also has multiple examples where Santander failed at institutional control, ignoring fake loans, predatory practices, pay structure encouraging such practices etc. but the focus seems to be about that buyer.
I think since the beginning of the thread all the issues are raised against predatory lending practices but the arguments keeps coming back to sub-prime lending & “borrower” accountability.
agree with the education and lack of help or support for education.