Santander to refund auto loan fees under New York settlement
The state Department of Financial Services said Santander will pay a $400,000 penalty and restitution to affected customers. Credit: Bloomberg/Ron Antonelli
Long Islanders who took out auto loans may qualify for refunds on fees related to loans from lender Santander Consumer USA under a settlement announced Wednesday by New York's top banking regulator.
The state Department of Financial Services said the lender will pay a $400,000 penalty and $275,000 in restitution to customers because it overcharged borrowers who sought extensions to pay their loans in 2016 and 2017. Santander Consumer USA, the auto finance and consumer lending arm of Santander's American operations, is a sister company of Santander N.A., which operates bank branches in Garden City, Hempstead and Melville.
The state's investigation found Santander charged consumers a $25 monthly feeafter granting them grace periods for payments — despite stating in the published extension agreement terms that they only had to pay a single $25 fee, according to the state's consent order.
“The department is committed to holding institutions accountable for essential consumer safeguards under New York Law," said Kaitlin Asrow, acting superintendent of the state Department of Financial Services, in a statement.
Borrowers who had an auto loan with Santander before 2018 who believe they may have wrongly paid the fees can call the lender's hotline at 888-356-0269.
Consumer advocates said the settlement highlights the importance of strong protections for borrowers, who face an increasingly confusing and expensive process to purchase a car, at a time when the Trump administration has slashed funding from the Consumer Financial Protection Bureau.
The department said New Yorkers paid Santander $237,000 in undisclosed fees, and the lender assessed another $86,000 in fees but never collected them.
In a statement, the company said the settlement was related to practices that it halted years ago.
"This agreement closes the book on a legacy issue from nearly a decade ago, which occurred over a limited period, and was voluntarily discontinued in 2017," the company said in a statement to Newsday through spokesman Andrew Simonelli. "It is now being addressed through refunds and waivers for affected customers."
Santander has waived any unpaid fees related to the charges and plans to issue refund checks within 30 days, the company said.
Santander Consumer has previously faced scrutiny over its lending practices. In 2020, the lender reached a $550 million settlement with 34 states, including New York, to resolve claims it had knowingly given car loans to people at high risk of default from 2010 to 2019.
Santander Holdings USA, the holding company for the auto lender, is a subsidiary of Banco Santander, S.A., the a global retail bank headquartered in Madrid, Spain. The company has 176 million global customers, according to its website, and about $2 trillion in assets.
Regulators should strictly enforce laws designed to prevent deceptive practices like those described in Wednesday's settlement, said Ellen Harnick, executive vice president and director of state policy for the Center for Responsible Lending in Oakland, California. However, lenders often make the case that they should be granted exceptions to certain consumer protection laws because they make loans to people who otherwise couldn't afford to buy a car, she said.
"That cannot be allowed to be the excuse for ripping people off," said Harnick, who grew up in Baldwin. "This is the community of consumers who can least afford to be ripped off."
Consumers should seek out car loans from a bank or credit union before shopping at dealerships to get multiple loan options, said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington D.C.
Still, they must carefully read contracts to avoid junk fees, which has gotten harder in the age of e-signatures on tablets, he said.
"The car financing process is particularly opaque and is ripe for abuse," Rheingold said.
Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.
