DETROIT — It’s shaping up to be a rough week for Credit Acceptance Corp.
The suburban Detroit subprime auto lender has, in the span of a few days, seen its stock price fall off a cliff, had a lawsuit filed against it by the state attorney general of Massachusetts and drawn the ire of a notorious activist short-seller who believes Credit Acceptance is vastly overvalued and has unscrupulous business practices.
Company CEO Brett Roberts also sold a batch of stock just days before multiple states sent the company subpoenas that questions its business practices, according to federal regulatory filings.
Credit Acceptance’s borrowing and lending practices are the common theme in the various complaints made against the company, which employed more than 2,100 people in 2019 when it was named one of the best 100 companies to work for by Forbes.
Credit Acceptance had 2019 revenue of $1.49 billion, up 53.6 percent from 2016, according to its eighth-place ranking on the 2020 Crain’s Detroit Business list of the 50 fastest-growing companies in southeast Michigan. Crain’s is an affiliate of Automotive News.
“This company made unaffordable and illegal loans to borrowers, causing them to fall into thousands of dollars of debt and even lose their vehicles,” Massachusetts Attorney General Maura Healy said in a statement Monday. “We are taking a close look at this industry and we will not allow companies to profit by violating our laws and exploiting consumers.”
The Massachusetts lawsuit says between 2012 and 2018, Credit Acceptance and its employees “harassed” borrowers in the Bay State by calling them as often as eight times a day. State law says such calls are to be limited to no more than twice per week.
The lawsuit alleges that the lender defrauded as many as 24,000 borrowers over a six-year period in Massachusetts and seeks as much as $120 million in damages and injunctive relief, according to a CBS MoneyWatch report.
The lawsuit also alleges that Credit Acceptance did not inform investors that the company topped off the pools of loans they packaged and securitized with higher-risk loans, despite claiming otherwise in disclosures to investors.
The lawsuit lays out seven specific areas where Massachusetts says Credit Acceptance has acted improperly, ranging from unfair or deceptive collection practices to improper repossession practices.
The company did not respond to a Crain’s request for comment.
The accusations laid out in the Massachusetts lawsuit — coupled with some 40 states in total investigating the company’s business practices — speak to the concerns of Andrew Left of Citron Research, a Los Angeles-based activist investor and short-seller who has taken a financial position in Credit Acceptance Corp., saying its stock is vastly overvalued.
