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In the spring of 2020, attorneys general from nearly three dozen states announced a landmark legal settlement with the nation’s largest auto lender for risky borrowers.
Santander Consumer USA had for years made high-interest loans to people it knew couldn’t afford them, the officials alleged. When those borrowers got into financial trouble, it allowed them to delay making payments — without disclosing the steep costs of doing so. Because of those extensions, customers ended up owing thousands of dollars in surprise interest charges, and in many cases, they lost their cars.
“Predatory lending practices like this led to the 2008 financial crisis and harmed millions,” Josh Shapiro, then Pennsylvania’s attorney general and now its governor, said in a press release announcing the settlement, which imposed new consumer protections and required clearer disclosure about how loan extensions work.
The multistate effort, he added, “will put a stop to some of Santander’s most outrageous tactics.” The bank did not admit any wrongdoing as part of the settlement, which it said resolved a “legacy underwriting issue.”
But by the time the attorneys general were heralding their crackdown, they were receiving strikingly similar complaints from customers with loans from another lender, Exeter Finance.
The parallels were more than coincidence. The company was being run by former Santander executives who had left that bank amid the investigation. By 2020, most of Exeter’s corporate leadership — including its CEO and its operations chief — was composed of people who had overseen Santander during the period that the state attorneys general said it was “misleading, failing to disclose material information, or otherwise confusing consumers.”
Those elected officials, however, have taken a decidedly different approach with Exeter. In fact, in 12 states that participated in the Santander agreement, officials have taken little or no action in dozens of cases alleging nearly identical behavior, according to a ProPublica investigation.
The news organization reviewed nearly 200 consumer complaints filed with state regulators over the past five years and found they rarely pressed Exeter about its practices. In Washington, they asked Exeter to participate in a voluntary mediation process, then closed the case when the company didn’t respond. In New Jersey, they just forwarded complaints to their counterparts in Texas, where the company is based, and did nothing more. In Kentucky, an office sat on a complaint for months while the borrower’s car was repossessed.
Some attorneys general declined to answer questions for this story, while others — such as those in Pennsylvania, Georgia and California — did not release documents in response to our public records requests. But Prentiss Cox, a University of Minnesota law professor who spent years in charge of consumer protection at the Minnesota attorney general’s office, said attorneys general often have limited staff and money to bring cases against companies, “and you bet players like subprime auto lenders know that.”
At least two states now appear to be scrutinizing Exeter. Georgia has acknowledged investigating the company, and Louisiana recently signaled potential action after ProPublica published the first part of its series last month. In response to questions about Exeter, the state attorney general’s office said it “cannot comment on ongoing investigations.”
Enforcement from attorneys general is particularly significant for auto borrowers, given how little recourse they have for legal action, said Chris Peterson, a law professor at the University of Utah and a former senior official at the Consumer Financial Protection Bureau. Many car loan contracts explicitly limit borrrowers’ right to bring cases in civil courts by forcing them into arbitration. Consumer rights lawyers “often give indirect auto finance companies and car dealers a free pass because it’s so difficult to get them into court anymore,” he said.
That makes state attorneys general one of the few official checks on the country’s trillion-dollar auto lending industry.
Over the past decade, Exeter has grown to become one of the largest players in the business, with more than 500,000 active loans worth $10 billion. As ProPublica reported last month, extensions are fundamental to its business model. The company routinely grants borrowers several extensions, which typically add thousands of dollars in new interest charges to the loan. Dozens of customers told ProPublica that Exeter didn’t clearly disclose the charges, even as the extensions drove them deeper into debt.
The news organization reached out to Exeter’s executives for this story and they either declined to comment or did not return calls. In response to written questions, the company issued a statement defending its extension practice, which it said “has been heavily reviewed by its regulators and is fully compliant with all applicable laws.” It did not answer questions about which regulators had reviewed its practices.
“Extensions are granted to customers who request them so that they can remain in their vehicles and provide for their families,” the company said.
ProPublica’s investigation found these payment deferments can do the opposite though, with borrowers losing their cars even after paying the equivalent of the original loan or more.
New Address, Same Faces, Same Playbook At the start of 2016, Exeter was headed toward failure. Financial disclosures show it had lost about $50 million over the previous two years. Its turnaround coincided with the arrival of a new leadership team that had a long history in subprime auto loans — and in aggressively granting financially shaky borrowers multiple extensions.
The new CEO, Jason Grubb, had just spent more than a decade at Santander, ultimately becoming its president. Exeter’s operations chief, Brad Martin, had been working for Santander in a similar capacity. The two joined Exeter while their former employer was embroiled in state and federal investigations into allegedly deceptive and unfair lending practices. A slew of other Santander staffers — from the company’s human resources, compliance and executive arms — followed them. Jason Kulas, who was Santander’s CEO until 2017, joined Exeter’s board of directors in 2019 and today is also its chief financial officer.
“We went ahead and kind of got the gang back together again,” said a former executive at Exeter and Santander who asked to not be named for fear of professional repercussions.
There was little stopping them. Neither a federal settlement with Santander in 2018 nor the subsequent one from state attorneys general named the bank’s individual executives. While regulators have the power to do so when they bring legal actions against companies, they rarely use it with major lenders like Santander, said Dalié Jiménez, a professor of consumer law at the University of California, Irvine.
In such cases, the government’s chief aim is getting a settlement that results in fines and reforms for consumers, she said, and the people running those financial institutions “are going to fight really hard” against cases that target them directly.
Exeter’s Texas headquarters are in a suburb just 15 minutes from Santander Tower. Under its new management, Exeter loosened its lending criteria: It began approving borrowers with a debt-to-income ratio of up to 70%, meaning they would spend as much as $7 of every $10 of their paychecks on the car loan and other debts each month. (Consumer advocates and lenders recommend borrowers keep their debt ratio around 35%.)
Exeter also accepted customers with lower credit scores than it had previously, lent them more money than before — as much as $50,000 per loan — and gave them more time to repay it. Some agreed to repayment schedules stretching longer than six years, meaning more costly loans over the course of the term.
Many borrowers had trouble fulfilling the terms. Financial disclosures show the number of Exeter loans with five or more payment extensions soared in the first three years after Grubb and Martin took over. As did the company’s revenue. Exeter went into the black in 2016 and stayed there, claiming $94 million in pretax profit in 2018, according to rating agency reports.
Exeter said in a statement that “extensions are not a profit strategy.” However, ProPublica found the company sometimes made more money on loans that defaulted than on ones in which borrowers paid on time.
Each time the company grants an extension, it resets the clock and reclassifies the delinquent loan as being on schedule. Exeter has done this in some cases as many as 12 times over the course of a 72-month loan, with borrowers continuing to make payments in hopes of catching up.
Some of them turned to their attorneys general for help even before the regulators had finalized their settlement with Santander. The consumers alleged that Exeter had added huge interest charges without clear explanation.
In early 2020, Deborahlyn Wells, a disabled Kentucky woman, sent such a complaint to state Attorney General Daniel Cameron. Wells was trying to prevent Exeter from seizing her 2008 GMC Acadia. She wrote that she’d taken multiple extensions with the understanding that Exeter had moved the payments “to the end of the loan to keep me current.” At the time, Wells had paid the company almost $13,000, but she was nevertheless on the verge of repossession. Nearly all of her payments had gone to interest.
Cameron’s office took months to contact Exeter about Wells’ complaint, records show. Even then, it simply forwarded her letter to the company, which confirmed it had given her five extensions. By that point, Exeter had already repossessed Wells’ car and auctioned it off.
Records obtained by the attorney general’s office show Exeter’s extension notices did not explain that Wells’ payments would first be applied to the interest from extensions, which would delay repayment of the original loan balance. The notices only hinted at the financial consequences, saying “any payments you can make before they are due will help you minimize interest.”
The company has said that it updated its written disclosures in late 2021 — roughly 18 months after the Santander settlement — but declined to provide copies or details about the changes.
Notices from earlier this year, provided to ProPublica by borrowers, clarified how interest charges increase and payments are applied after extensions. However, they did not include the actual dollar amount of what the deferments would cost. If borrowers wanted to know more, the letter directed them to call a toll-free number.
Cameron, who left the attorney general’s office this year after an unsuccessful bid for governor, did not respond to requests for comment. Neither did his successor, Russell Coleman.
Weak Enforcement in the States The Santander settlement, announced just three months after Wells’ complaint, took aim at the type of disclosure failures that were at the core of her case. It required Santander to explain to customers that an extension will add new interest charges and increase the amount they’ll owe at the end of their loan. (Notably, the deal did not require Santander to tell customers how much additional interest they’ll pay due to extensions. That’s why ProPublica built a tool to provide estimates.)
And while on paper it technically applied to just one company, consumer advocates and legal experts say it should have telegraphed new standards for all lenders, including Exeter.
With such public announcements, regulators “are putting every other company on notice that we will come after you,” said Ira Rheingold, executive director of the National Association of Consumer Advocates. “If you engage in those practices, we will hold you to account.”
Indeed, some attorneys general pledged to do exactly that. “Lenders and servicers have an obligation to deal fairly with Washington borrowers,” said the state’s attorney general, Bob Ferguson, who had helped craft the Santander settlement. “And when they fail to do so, my office will be there to protect Washingtonians.”
Matthew Hutchinson hoped for that kind of protection when he contacted Ferguson’s office in early 2022. He’d been rear-ended while driving on a highway near Vancouver, Washington, flipping his Nissan Frontier over the center median and into oncoming traffic. His truck was wrecked, but he was sure the insurance payout would easily cover whatever he still owed on his Exeter loan.
Instead, the payout was thousands of dollars short.
Hutchinson had taken five extensions during months when money was tight. He said Exeter told him he would owe some extra interest, but he was given nothing in writing and had assumed the cost would be “reasonable.”
The deferments had actually added about $4,000 in interest to his debt, according to ProPublica’s analysis of Hutchinson’s loan records.
Hutchinson filed a complaint accusing Exeter of charging excessive interest, and Ferguson's office sent a letter to Exeter. In its response, the lender acknowledged it had granted Hutchinson the extensions.
But the attorney general’s staff did not press for more information about whether Exeter had explained how extensions add additional interest charges, one of the requirements of the states’ Santander settlement. Instead, it sent the matter to its voluntary mediation program, designed to help consumers and businesses reach an agreement.
Exeter ignored the request to mediate, regulatory records show, and Ferguson’s office closed the case a month later.
“I was confused and frustrated,” Hutchinson recalled of the swift dismissal. “Because I thought the only thing I could do, legally, was contact the attorney general’s office and see if there was any way they could help me.”
His loan defaulted. He said he’s still being pursued for the charges the extensions created.
Exeter declined to comment on specific cases for this story, but it defended its practices in a statement. “Customers always receive an Extension Agreement,” the company said. “Any assertion that a customer wasn’t provided an Agreement is false.”
Ferguson’s office also declined to discuss Hutchinson’s case but confirmed that it closes complaints if a business does not respond.
Nevertheless, Brionna Aho, the office’s communications director, said that closed complaints “can and do sometimes lead to open investigations and civil enforcement.” She would not comment on whether that had happened in Hutchinson’s case.
In other states, attorneys general didn’t even contact Exeter when they received complaints.
That was the outcome in New Jersey after Sophia Nelson and her husband wrote to state Attorney General Gurbir S. Grewal. The couple had struggled to make their monthly car payment to Exeter while caring for their daughter, who has a rare swallowing disorder. They’d taken extensions to avoid default, and they filed a complaint in 2020 saying that, unbeknownst to them, the extensions added $9,000 in interest to their debt.
Grewal declined to investigate and sent the complaint to Attorney General Ken Paxton in Exeter’s home state of Texas.
Paxton’s office told Nelson it could not take direct action on every complaint and would contact her “if we need additional information.”
Nelson said she and her husband never heard anything more. She said they didn’t expect the complaint would help them personally, but they “hoped there would have been some legal action taken or at the minimum an investigation of Exeter’s practices.”
The spokesperson for New Jersey’s attorney general said the office’s action was a “customary” response to consumer complaints. Paxton’s office in Texas did not respond to multiple requests for comment.
Cox, the University of Minnesota law professor, said the public pronouncements of attorneys general are often constrained by the fiscal realities of their offices — something that companies are well aware of.
Lenders “should be afraid of the AGs,” he said, “but at the same time they know that there are limits.”
In February of 2023, nearly two years after Illinois Attorney General Kwame Raoul declared that his settlement “holds Santander accountable and sets an important precedent,” a consumer wrote to him stating that Exeter stood to collect “300% of the original amount financed” thanks in part to extensions. After seeking information about how interest was charged on these deferments, the borrower reported that “Exeter refused to provide me with any relief.”
Raoul’s office had led the multistate coalition against Santander. But when the consumer told Exeter they’d be telling the attorney general about their problems, they said the company “showed no concern.”
April McLaren, a spokesperson for Raoul’s office, told ProPublica the complaint was closed after “an attempted, but unsuccessful mediation.” She wouldn’t provide further details.
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