Credit Acceptance Corporation has agreed to a $700 million multistate settlement over its subprime auto lending, and one provision reaches forward: borrowers deemed at risk who default and lose a car to repossession will owe only a sliver of what is left. Its settlement with 39 states and the District of Columbia was announced on September 17, and its debt relief is a rule for the years ahead as much as a payout for past loans.
What the 95 percent rule covers, and what it does not
The New York attorney general’s office describes the condition plainly: if certain at-risk borrowers default on a Credit Acceptance car loan within 12 or 18 months and have the vehicle repossessed and sold, the company “must forgive 95 percent of their debt and will only be allowed to collect the remaining five percent.” The relief is therefore triggered by a sequence of events, not handed to every customer. A borrower who keeps paying, or who defaults after the window, is not covered by that clause.
The consent order and judgment supplies the mechanics. Its forward-looking waiver of 95 percent of any deficiency balance, the gap left when a repossessed car sells for less than the loan owed, applies to eligible accounts on contracts originating after December 1, 2025. It runs for five years from the order’s effective date, which the order sets at November 2, 2026. Other provisions run seven years.
Who counts as an at-risk borrower
The order defines the group with two measures taken when the loan was made. The consent order identifies borrowers with a Credit Acceptance Score under 56 and a payment-to-net-income ratio of 13 percent or higher. For these borrowers, a default inside the window followed by repossession and sale leaves the lender able to pursue only five percent of the deficiency. The attorney general’s office adds that the settlement bars debt-collection lawsuits and resale of that remaining five percent.
Anyone holding a Credit Acceptance loan, or a dealer-financed loan that was assigned to the company, faces a practical question after a repossession: does the balance a collector now demands reflect the 95 percent waiver, and does the account fit the order’s definitions? The order, not a phone call from a collector, answers that. A borrower in this position should ask for the account history in writing, compare the origination date and loan terms with the order, and keep every notice. Those documents decide whether the deficiency should have been cut to five percent.
Borrowers who get a collection contact over a repossessed car’s balance can pair that paper trail with The Bank Account & Debt Protection Kit, which contains the debt-validation steps and a protected-funds and dispute log.
Check a Credit Acceptance deficiency demand with the debt-validation steps →
The $700 million: debt relief, restitution and penalties
The 95 percent clause is one piece of a larger package. According to the attorney general’s release, the $700 million total breaks down as more than $630 million in debt relief for more than 55,000 consumers nationwide, $60 million in restitution for consumers who lost vehicles to repossession, and $15.5 million in penalties paid to the states. About 2,500 of the borrowers are New Yorkers, and New York’s combined share is roughly $34 million.
The order’s own figures line up with that structure. It estimates full debt relief of $388 million for one category of early-defaulted accounts and $246 million for a second category, covering loans from November 1, 2015 through November 30, 2025 that met the same credit-score and payment-ratio tests. The restitution and multistate payments appear in the order as $60 million and $15.5 million.
What the states say Credit Acceptance did
New York Attorney General Letitia James said in the release: “CAC preyed on consumers in New York and across the nation with false promises of affordable loans, only to exploit them with outrageous interest rates that ruined their credit and cost them their cars.” The investigation found average annual rates above 38 percent, some over 100 percent, and roughly half of consumers losing their vehicles to repossession. Regulators also said the company concealed loan costs, coordinated with dealers to sell expensive add-on products and insurance, and packaged loans into securities with false representations about legal compliance.
The case began in January 2023, when the New York attorney general and the Consumer Financial Protection Bureau sued the company. The release says the bureau later abandoned its case, and the states carried on to the settlement. Going forward, the company must also contact consumers outside the dealership to disclose add-on products and offer a way to cancel unwanted products while keeping the vehicle.
Checking a repossession balance against the Credit Acceptance order
The free route starts with the documents themselves. The attorney general’s announcement lists the participating jurisdictions and the benefits, and the consent order text sets the definitions. A borrower can read the order’s paragraphs on early defaulted accounts and the forward-looking 95 percent waiver, then compare them with the loan paperwork. Because the waiver applies to contracts originating after December 1, 2025 and the order takes effect November 2, 2026, the origination date is the first fact to pin down.
The records worth gathering are the retail installment contract, the repossession notice, the auction or sale notice showing the sale price, and any letter stating a deficiency. The deficiency is the loan balance plus fees, less the sale proceeds, so a demand that does not show that arithmetic is a reason to ask for an itemization. The attorney general’s office also says remaining debt on qualifying accounts may not be sold or sued on.
A collector’s claim that a balance is owed after repossession should be answered in writing and kept on file. The order governs Credit Acceptance and what it may collect, so a demand that exceeds five percent of the deficiency on a qualifying account is the discrepancy to document.
For the collection side of that paperwork, The Bank Account & Debt Protection Kit includes the debt-validation steps and a protected-funds and dispute log, inside a 10-page kit that also covers the 2-month bank protection rule and the frozen-account response.
See the debt-validation steps for a repossession deficiency demand →
This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
