Tens of thousands of Americans will have car loan debts forgiven: company agrees to nearly $700 million settlement

One of the largest American lenders for car buyers with poor or limited credit history has agreed to a massive settlement with state attorneys general. Credit Acceptance Corporation must provide consumers with $694 million in debt forgiveness and cash compensation. More than $630 million of that amount is specifically for forgiving car loan debt.

The settlement concerns borrowers of Credit Acceptance Corporation, or CAC, a company specializing in the so-called subprime segment. These are loans for people with low credit scores or limited credit history, who find it harder to get ordinary bank financing.

Regulators alleged that the company financed some car loans even though, by its own calculations, it could have known in advance that the borrower would likely be unable to repay even the principal amount.

Credit Acceptance settled the claims without admitting guilt or wrongdoing.

How much debt should be forgiven

The bulk of the assistance — $634 million in debt forgiveness for certain troubled loans issued from November 1, 2015, to November 30, 2025.

Of that amount, about $388 million of debt should be forgiven to customers whose cars have already been repossessed for non-payment.

Another roughly $246 million will be forgiven to borrowers whose cars are still in their possession. As a result, some customers will be able to keep their cars.

In addition, $60 million in cash compensation is provided for consumers who received particularly risky loans.

The company must also pay about $15.5 million to the attorneys general to cover investigation and consumer protection costs. Therefore, some state agencies estimate the total financial effect of the settlement above $694 million, but the amount intended directly for consumers is precisely $694 million in cash payments and debt forgiveness.

Why regulators consider these loans problematic

Credit Acceptance works with buyers who often cannot get standard car loans. But the multi-state investigation focused on how the company assessed the likelihood of repayment.

CAC assigned each loan its own indicator reflecting the share of the amount it expected to eventually collect from all sources.

According to the attorneys general, among the issued loans there were some for which the company itself predicted that the customer would not repay even the initial principal amount — excluding interest.

Despite that, such deals were financed. Some borrowers then stopped managing payments, after which cars were repossessed and sold at auctions.

State authorities believe that for financially vulnerable buyers, this model could turn a car from a necessary means of transportation into a debt trap: a person lost the car, but could still owe remaining debt.

Additional products were added to loans

The second major part of the claims relates not only to the interest rates or loan sizes themselves.

The attorneys general alleged that CAC's system of working with car dealers did not sufficiently prevent the addition of paid ancillary products to contracts that buyers did not always consciously purchase.

In particular, this concerns Vehicle Service Contracts — service contracts for car repair and maintenance — and GAP, or Guaranteed Asset Protection.

A GAP product is designed for situations where a car is stolen or totally destroyed and the insurance payout is insufficient to cover the remaining loan balance.

In themselves, such products are legal and can be useful. The problem, according to regulators, arose when the buyer did not understand they were paying for an additional service, or considered it a mandatory condition for getting the loan.

New rules should hinder such sales

The settlement provides not only for forgiveness of old debts, but also for changes to Credit Acceptance's business practices.

The company must improve upfront disclosure of the cost of additional products and, after purchase, separately notify the customer about which services were included in the deal.

Consumers should also have an easier way to cancel such products, and dealer activities will be monitored more strictly.

Another new requirement concerns the price of the vehicles themselves. For seven years, for certain categories of borrowers, CAC must limit the price of a financed car to no more than 109% of its reference retail value.

In addition, the company must implement measures to prevent dealers from raising car prices solely due to the buyer's poor credit history or selling the car above the previously advertised price.

Some borrowers will have 95% of their debt forgiven if the loan quickly becomes problematic

Separate protection is introduced for some new risky loans issued starting in December 2025.

If such a loan quickly stops being serviced — within the first 12 or 18 months depending on risk level — qualifying customers may receive forgiveness of 95% of the remaining debt.

Credit Acceptance also will not be able to file debt collection lawsuits against such borrowers.

This mechanism should be in effect for five years starting from November 2, 2026.

Do borrowers need to apply on their own?

Those entitled to debt forgiveness will not have to independently prove they meet the program's conditions. Credit Acceptance must notify such customers.

Consumers eligible for cash compensation will be separately notified by the settlement administrator.

Thus, having a Credit Acceptance loan does not automatically mean debt forgiveness. Assistance applies only to loans meeting the criteria established by the settlement.

Consumers should also be wary of letters and messages offering to "process" compensation for a fee. Official notifications should come directly from Credit Acceptance or the appointed administrator.

Why this case matters beyond one company

The American auto lending market is especially sensitive for people with low incomes and poor credit histories. For many families, a car is essential to get to work, but lack of a good credit score can sharply increase financing costs.

The problem becomes more serious when high car prices and interest rates are compounded by additional products, fees, and terms that buyers poorly understand.

That is why the current settlement is interesting not only for its record debt forgiveness amount. Regulators are trying to change the whole mechanism of issuing the riskiest auto loans: the lender must clearly explain the likelihood of problems in advance, control dealer actions, and provide an exit route for borrowers if an initially risky loan quickly becomes unaffordable.

Credit Acceptance on its part said the agreement ends years of disputes with regulators and does not require fundamental changes to its business model. The company emphasizes that the settlement is made without admission of guilt and that its services give people with limited access to traditional credit the opportunity to buy a car.

The settlement was announced on September 17, 2026, and must pass the required legal procedures. The main new requirements for the company are set to take effect from November 2, 2026.

Source materials: Office of the Illinois Attorney General, Office of the Minnesota Attorney General, Credit Acceptance Corporation