On September 17, 2026, New Jersey and 40 other state attorneys general announced a $709.5 million settlement with Credit Acceptance Corporation (CAC), one of the nation’s largest subprime auto lenders, resolving allegations that CAC:
(i) originated loans it knew borrowers could not afford and
(ii) failed to prevent dealers from packing loan contracts with unwanted add-on products.
The settlement arrives after the CFPB permanently dropped its own case against CAC in 2025. For auto finance companies, it signals a potential new era of state-led enforcement and establishes underwriting and dealer-oversight standards expected by the states that every indirect lender should understand.
What Happened
CAC is an indirect auto finance company that purchases retail installment contracts from a nationwide dealer network, specializing in subprime borrowers.
In January 2023, the CFPB and New York AG sued CAC in the Southern District of New York. The CFPB dropped its case in 2025. New Jersey then led a 41-state coalition to negotiate the settlement announced in September 2026. New York is concurrently settling its separate federal litigation.
Key Allegations by the AGs
- “Designed-to-Fail” Lending. The AGs alleged that CAC originated loans that its own proprietary scoring model predicted borrowers could not repay, including loans where it predicted the consumer could not even pay back the principal. According to the AGs, these loans were nevertheless profitable because repossession proceeds and pre-default collections exceeded origination costs.
- Add-On Product Packing. The AGs also alleged that CAC’s dealer compensation methodology and insufficient oversight resulted in dealers aggressively selling vehicle service contracts (VSCs) and GAP products to consumers who were either unaware of these purchases or were told that such products were required for financing.
The consent order specifies that CAC denies all violations alleged by the AGs.
Settlement Terms at a Glance
- $60 million cash restitution fund: Distributed by AGs to consumers with particularly risky loans, to be identified by the AGs.
- $388 million debt relief: For consumers whose (i) accounts scored below a certain threshold according to CAC’s internal scoring system and a ratio of monthly payment to net income at origination (PTNI) of 13% or higher; (ii) vehicles were repossessed within 18 months of origination; and (iii) accounts originated during November 2015 through November 2025. Relief also includes credit reporting tradeline deletion.
- $246 million debt relief: For consumers whose accounts met the criteria above, but whose vehicles were not repossessed. Relief also includes lien releases and title transfers.
- $15.5 million: Distributed to the participating attorneys general.
- All collection activity and credit reporting on the accounts described above must cease immediately, and each affected consumer must be notified.
- CAC’s press release stated that “The monetary components of the resolution will not require the Company to record additional charges beyond amounts previously accrued and disclosed in the Company’s financial statements.”
Key Injunctive Terms
- “Off-ramps” for high-risk loans: For loans originated after November 2025 that meet certain credit-score/PTNI thresholds that default early, CAC must waive 95% of any deficiency balance and is barred from filing collection lawsuits (5-year term).
- Pre-loan risk disclosures: Subprime borrowers ( credit score below 600) or borrowers with no credit score must be shown delinquency rates for consumers with similar credit profiles.
- Vehicle price cap: 109% of retail book value for sub-600-credit-score consumers (7-year term).
- Ancillary product protections: Written consent forms, post-purchase notifications within 10 days, easy cancellation and dealer monitoring with complaint-trigger thresholds.
- Income verification and term limits: Mandatory income verification; used-vehicle loan terms capped at 75 months or the industry average plus 12.
- Compliance monitoring: Annual reports to an AG-designated monitoring committee for five years.
CAC’s press release also stated that the injunctive terms “do not fundamentally alter the Company’s business model.”
Reading Between the Lines: The AGs’ Legal Theories
The consent order contains no findings of liability. But the structure of the relief reveals the underlying enforcement theories — and those theories have implications well beyond CAC.
- A de facto ability-to-repay standard. There is no federal ATR/QM rule for auto loans. However, the consent order’s PTNI thresholds, credit-score cutoffs and mandatory “off-ramps” effectively embed what amounts to one created through enforcement, not rulemaking. If a lender’s data says a borrower exceeds a particular but unspecified likelihood of default, originating the loan may itself be an unfair practice, according to the AGs.
- Indirect lenders are liable for their dealers’ unfair or deceptive practices. The terms hold CAC accountable for dealer pricing discrimination and add-on packing — requiring price audits, complaint monitoring and dealer termination. Assignees cannot disclaim responsibility for point-of-sale abuses.
- Unfairness without misrepresentation. Mass debt forgiveness and credit-reporting deletion go beyond traditional fraud remedies, pointing to a standalone unfairness theory: according to the AGs, originating loans destined to fail is itself an unfair act, regardless of whether any misrepresentation was made.
Why It Matters
- State AGs are filling the CFPB vacuum. After the CFPB withdrew from the CAC case in 2025, 41 AGs coordinated to secure broader relief than the Bureau originally sought. This is the proof of concept for multistate consumer finance enforcement.
- This is a national event, not an outlier. The coalition spans red and blue states alike. The terms could function as de facto national standards for subprime auto lending.
- The injunctive terms are a compliance blueprint. Auto finance companies, particularly in the subprime lending space, can expect the benchmarks discussed above to inform future AG investigations of other lenders.
- “We don’t control our dealers” is not a defense. Regulators will look at whether lender compensation structures incentivize misconduct and whether adequate monitoring programs exist.
- The market effect is unclear. It remains to be seen how (or whether) this will affect the ability and willingness of auto finance lenders to serve consumers with poor credit who wish to purchase automobiles.
The Bottom Line
This settlement confirms that state AGs have the coordination infrastructure, legal authority and political will to enforce consumer finance matters on a national scale. The standards embedded in this consent order are likely to be treated by the AGs as the new compliance baseline.
Companies in the indirect auto lending space should expect heightened scrutiny of their lending and dealer oversight practices and should review their practices now, with an eye towards the issues the AGs are focused on to prepare for such scrutiny.