Credit Acceptance Corp. faces tough week with on-loan trial and stock slump

It’s been a tough week for Credit Acceptance Corp.

The Southfield-based (NASDAQ:CACC) subprime auto lender has seen its stock price plummet in the space of a few days, had a lawsuit filed against it by the Massachusetts State Attorney General, and has drawn the ire of a notorious activist short seller who believes credit acceptance is grossly overvalued and has unscrupulous business practices.

The company’s CEO, Brett Roberts, also sold a batch of shares just days before several states issued subpoenas to the company challenging its business practices, according to federal regulatory filings.

The borrowing and lending practices of Credit Acceptance Corp. are the common theme of the various complaints filed against the company, which employed more than 2,100 people in 2019 when Forbes named one of his top 100 companies to work for.

Accepting Credit had revenue of $1.49 billion in 2019, up 53.6% from 2016, according to its eighth place on Crain’s 2020 list of 50 fastest growing companies in southeast Michigan.

“This company made unaffordable and illegal loans to borrowers, forcing them into thousands of dollars in debt and even losing their vehicles,” Massachusetts Attorney General Maura Healy said Monday, announcing the Commonwealth lawsuit. . “We are watching this industry closely and we will not allow companies to profit from violating our laws and exploiting consumers.”

The Massachusetts lawsuit says Credit Acceptance Corp. and its employees, between 2012 and 2018, “harassed” Bay State borrowers by calling them up to eight times a day. State law dictates that these calls should be limited to no more than twice a week.

The lawsuit alleges the lender defrauded up to 24,000 borrowers over a six-year period in Massachusetts, and seeks up to $120 million in damages and injunctions, according to a CBS MoneyWatch Report.

The lawsuit also alleges that Credit Acceptance Corp. did not notify investors that the company supplemented the loan pools they packaged and securitized with higher-risk loans, despite claiming otherwise in investor disclosures.

The lawsuit sets out seven specific areas where the Commonwealth says Credit Acceptance acted improperly, ranging from unfair or deceptive collection practices to improper repossession practices.

The company did not respond to Crain’s request for comment.

The charges laid out in the Massachusetts lawsuit — coupled with a total of 40 states investigating the company’s business practices — address concerns from Andrew Left of Citron Research, an activist investor and Los Angeles-based short seller. who took a financial position in Credit Acceptance Corp., saying its stock is grossly overvalued.

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