Crain's Detroit Business: Matthew Roling on Credit Acceptance Corp. settlement
A $27.2 million settlement agreement finalized last week by Credit Acceptance Corp. and the state of Massachusetts may amount to little more than a "cost of doing business" for the Southfield-based company. Still, the settlement that the subprime auto lender struck with the office of Massachusetts Attorney General Maura Healy could go a long way toward helping those consumers who have found themselves negatively affected by the company's practices, alleged to include harassment of those late on payments and high fees, according to consumer advocates and court documents. The settlement will be made available to about 3,000 residents of the state. If distributed evenly that comes out to approximately $9,000 per person. As a subprime lender focused on loans to people with limited incomes, or poor or no credit history, such settlements and lawsuits by regulators are all but inevitable for a company like Credit Acceptance, according to Matthew Roling, a finance professor at the Mike Ilitch School of Business at Wayne State University in Detroit. "The system they participate in is broken, and this is a dirty business," Roling said, referring to subprime lending. "This is a cost of doing business for them and I imagine they view it that way internally." The size of the settlement, just more than $27 million, is to Credit Acceptance equivalent to "you or I getting a speeding ticket," Roling said.