Credit Acceptance Corporation, a subprime auto lender that finances car purchases for buyers with damaged or limited credit, has agreed to pay $694 million in cash and debt relief to resolve claims brought by attorneys general in 41 states. The states allege the lender wrote loans it knew, or should have known, many borrowers could not repay, then let those loans run through to repossession and auction sale once they failed. The settlement takes effect November 2, 2026, and the money is split three distinct ways depending on what happened to a borrower’s car.
A $694 Million Deal With 41 States Over Loans the Lender’s Own Model Flagged as Risky
Michigan Attorney General Dana Nessel announced the settlement on September 18, 2026, describing Credit Acceptance Corporation, or CAC, as one of the nation’s largest auto finance companies, specializing in loans to consumers with limited or impaired credit histories — the market segment commonly called subprime. The states allege CAC assigns every loan a proprietary internal “score” predicting the percentage of the loan CAC expects to collect from all sources, and that the company continued funding loans scored so low its own model predicted many borrowers would default before repaying even the original loan principal. “Predatory lending practices can pull those already struggling financially into a downward spiral of inescapable debt,” Nessel said. “I am proud to have worked with my colleagues to secure a settlement that puts safeguards in place to help protect Michigan residents from entering risky car loans.”
A six-state executive committee led the settlement negotiations — Maryland, Arkansas, California, Illinois, Minnesota and New Jersey — and is joined by Alabama, Alaska, Arizona, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaiʻi, Indiana, Kentucky, Louisiana, Maine, Michigan, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington and Wisconsin, according to Nebraska Attorney General Mike Hilgers’s office. New York is resolving its own related litigation against CAC in the Southern District of New York on a separate, concurrent track, which is how the count behind the headline figure reaches 41.
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How the $694 Million Splits Between Cash and Two Pools of Debt Forgiveness
Of the $694 million total, both attorneys general offices describe the same three-part breakdown. Sixty million dollars is cash restitution, distributed to consumers CAC gave particularly risky loans. Separately, for risky CAC loans originated between November 1, 2015, and November 30, 2025, the company must provide, no later than November 2, 2026, $388,000,000 in debt relief to consumers whose cars have already been repossessed, and $246,000,000 in debt relief to consumers whose cars have not been repossessed — canceling debt still owed on those loans so the borrowers can keep their vehicles. Beyond the consumer-facing total, CAC must pay an additional $15 million directly to the settling states, a penalty layered on top of the $694 million rather than drawn from it. The distinction between the two debt-relief pools matters because it tracks a borrower’s real-world outcome: whether the car is already gone, or whether the loan is still salvageable.
Repossession, Deficiency Balances, and Why Older Borrowers Carry Outsized Risk
Subprime auto financing is disproportionately used by borrowers rebuilding credit after a medical bankruptcy, a spouse’s death, or a stretch of reduced income in retirement, and a repossession does more than remove a set of car keys. When a lender repossesses a vehicle and sells it at auction, the sale proceeds rarely cover what remains on the loan; the unpaid balance left over — a deficiency balance — is money the lender can still pursue for years after the vehicle itself is gone. The settlement’s allegations describe exactly that pattern: loans that CAC’s own risk model predicted, in some cases, would not generate enough recovery to repay even the original principal, long before interest, fees, or dealer add-ons are factored in.
The forward-looking half of the settlement targets that exact gap. For risky loans CAC originates starting in December 2025, the company must provide an “off ramp” once a loan shows early signs of failing: qualifying borrowers get 95% debt relief, and CAC is barred from filing a collections lawsuit to chase whatever balance remains. That off-ramp requirement runs for five years starting November 2, 2026 — a direct answer to the deficiency-balance chase that has historically followed a repossession, and the settlement term most likely to matter to someone taking out a CAC loan after that date rather than someone whose loan already predates it.
How a Covered Borrower Finds Out, and What Changes for the Next Loan
Borrowers do not have to file a claim to learn whether a loan qualifies. Consumers whose loans fall under the debt-relief provisions will be notified directly by Credit Acceptance, while consumers owed cash restitution will be notified by a settlement administrator handling those payments, under the terms both attorneys general offices described. Both notification paths run off loan records CAC and the states already hold, not an application a borrower has to track down or a form that has to be filed by a deadline.
The settlement also rewrites part of how the next CAC loan gets made. Dealers financing through CAC must give borrowers new pre-loan disclosures about default risk and vehicle value, and for seven years CAC must cap financed vehicle prices at 109% of retail book value for certain consumers. A separate set of terms targets Vehicle Service Contracts and Guaranteed Asset Protection add-ons that dealers sometimes “pack” into a CAC contract; CAC must build a monitoring process, add pre-purchase disclosures, and give consumers an easier path to cancel those add-ons after signing. None of it undoes a repossession that already happened, but it narrows how the next round of CAC borrowers can end up boxed into the math that produced $694 million in relief this time.
State Settlements and the Money They Send Back
A settlement notice like this one rarely spells out which of several payment categories a borrower actually falls into, or whether a letter arriving in the mail reflects a genuine state settlement or an imitation of one. Consumers who moved, changed a phone number, or lost track of an old auto loan from years earlier have no independent way to confirm a notice is real before acting on it.
The Settlement & Refund Recovery System is a 36-page guide built around the four-date rule for reading a settlement notice and the scam-proof rules for spotting an imitation.
Read the four-date rule and the scam-proof checks in The Settlement & Refund Recovery System.
This article was researched and drafted with the assistance of AI and reviewed by an editor.
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.
