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Credit Acceptance (CACC) Settles Auto-Loan Lawsuit, To Pay $27.2M

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Credit Acceptance Corporation CACC finally announces the settlement of the lawsuit with the Massachusetts Attorney General. In August 2020, AG Maura Healey filed a lawsuit in Suffolk County Superior Court, claiming that Credit Acceptance violated state consumer protection and debt collection laws and regulations.

It was alleged that Credit Acceptance made unfair and deceptive auto loans to thousands of consumers in Massachusetts, provided investors with false or misleading information regarding auto securities they offered, and engaged in unfair debt-collection practices.

Healey said in a statement, “Thousands of Massachusetts consumers, many of them first-time car buyers, put their faith in CAC to help them with an auto loan, but were instead lured into high-cost loans, fell deeper in debt, and even lost their vehicles.”

Per this lawsuit, since 2013, Credit Acceptance failed to inform investors that the pools of loans that were packaged and securitized were topped off with higher-risk loans despite claiming otherwise to investors.

Moreover, as a violation of state law, the company made high-interest subprime auto loans to Massachusetts borrowers, which it knew that they would not be able to repay.

Because of this, borrowers had to experience ruined credit. They lost vehicles and down payments, and were left with an average debt of $9,000. Also, borrowers were subject to hidden finance charges because of which the company’s loans exceeded the usury rate ceiling of 21%.

Notably, the material terms of the lawsuit had been disclosed in April 2021, according to which, Credit Acceptance has agreed to pay $27.2 million to resolve the claims. However, the auto lender did not admit any wrongdoing.

The $27.2 million will be paid into a trust overseen by an independent trustee, which will then be used in part to provide relief to customers, and debt relief and credit repair to borrowers.

Per Healey’s office, more than 3,000 Massachusetts borrowers will likely be eligible for the relief.

Notably, Healey has been conducting an industry-wide investigation of loan securitization practices in the subprime auto market for a long time now. In 2017, Santander Consumer USA Holdings Inc. SC agreed to pay $25.9 million to resolve a sub-prime auto loan probe by the attorney general.

Our Take

While Credit Acceptance has been witnessing a consistent increase in expenses along with worsening credit quality, which is expected to hamper financials, the company’s revenues are likely to continue to be positively impacted by an increase in finance charges, driven by a rise in demand for consumer loans. Moreover, an improvement in dealer enrollments and active dealers (despite tough competition) is a positive for the company.

Shares of the company have gained 70.6% so far this year compared with 48.1% growth recorded by the industry.

Zacks Investment Research

Zacks Investment Research

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Currently, Credit Acceptance sports a Zacks Rank #1 (Strong Buy).

A couple of other top-ranked stocks from the finance space are mentioned below.

American National Bankshares Inc. AMNB has witnessed an upward earnings estimate revision of 11.3% for the current year over the past 60 days. Its share price has increased 30.9% so far this year. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Community Trust Bancorp, Inc. CTBI carries a Zacks Rank #2 (Buy) at present. The Zacks Consensus Estimate for its current-year earnings has been revised 9.9% upward over the past 60 days. Its shares have gained 12.3% year to date.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Credit Acceptance Corporation (CACC) : Free Stock Analysis Report

Community Trust Bancorp, Inc. (CTBI) : Free Stock Analysis Report

American National Bankshares, Inc. (AMNB) : Free Stock Analysis Report

Santander Consumer USA Holdings Inc. (SC) : Free Stock Analysis Report

To read this article on Zacks.com click here.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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