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CREDIT NOW AGREES TO FORGIVE CAR LOANS
June 10, 2002
JUNE 10, 2002
CONTACT: James A. McKenna, Assistant Attorney General 207-626-8800
Attorney General Steven Rowe announced today that his office has settled a lawsuit against Credit Now Auto Company and Atlantic Acceptance Corporation (the Defendants), concerning the State's allegations that they improperly disposed of some of the vehicles they had repossessed when consumers defaulted on their loans. As a result of this settlement, as many as 600 Credit Now consumers will have their outstanding loans forgiven and could also receive back any money the Defendants collected after their vehicles had been repossessed.
The State's suit alleged that since 1993 the Defendants have been repossessing vehicles and then selling a significant number of them to their own agent at a dealers-only wholesale auction. After the auction, the consumer still owed the difference between the outstanding loan amount and the wholesale auction price. The Defendants then re-sold these cars at a higher price off a Credit Now retail lot, beginning the process again.
"As a result of this practice," said Attorney General Rowe, "Credit Now and Atlantic Acceptance often had the best of both worlds: they obtained a large loan deficiency against the consumer when they sold the car at the wholesale auction. Then they also realized for themselves the profits from the higher priced sale of the vehicle off their retail lots." The Attorney General said that it was the State's position that the defaulting consumers should have benefited from the higher priced retail sales of their repossessed vehicles and therefore would have owed the Defendants significantly less than the Defendants charged them after they repossessed their vehicles.
In settling the suit the Defendants also agreed to pay the State a civil penalty of $40,000 and $11,000 in attorney's fees. The Defendants did not admit to any wrongdoing.
The settlement provides that:
Any Credit Now consumers who defaulted on the loan with the Defendants and whose car was then purchased by their agent at the dealers-only auction would have any outstanding loan deficiency forgiven.
Any consumers who signed a release would receive back any money collected from the consumer after their cars had been repossessed.
The Attorney General will contact by mail eligible consumers and describe to them the money-back remedy provided by this settlement. The Defendants have 60 days to provide the Attorney General with the names and addresses of all eligible Credit Now customers.
Assistant Attorney General James McKenna, who handled the case for the State, estimates that more than 600 consumers may be eligible for relief. Attorney General Rowe specifically commended the Bureau of Motor Vehicles for its thorough investigation of this case.
