The settlement was announced on Tuesday.
Photo: Mark Lennihan (AP)

Facing accusations by the feds that it misled customers on their auto loans and insurance products, subprime auto lender Santander Consumer USA agreed to pay $11.8 million to settle the claims, a U.S. watchdog agency announced on Tuesday.

Santander is no stranger to regulatory backlash, having paid $26 million in 2017 as part of a settlement with the Massachusetts AG, which claimed the lender had funded “unfair and affordable auto loans” to more than 2,000 car buyers.

Now, the U.S. Consumer Financial Protection Bureau says Santander has agreed to pay $11.79 million over claims that it promised drivers lower monthly fees by allowing them to make interest-only payments, Reuters reported Tuesday, but failed to explain that this would increase the total cost of the loan.

The bank also failed to explain that “guaranteed auto protection,” or GAP insurance, would not cover the costs of a totaled vehicle as implied, the news outlet said.

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“Under the terms of the consent order, Santander must, among other provisions, provide approximately $9.29 million in restitution to certain consumers who purchased the add-on product,” the CFBP said in a news release, “clearly and prominently disclose the terms of its loan extensions and the add-on product, and pay a $2.5 million civil money penalty.”

The bank told Reuters in a statement that it’s “please to put this matter behind us,” and that “Strengthening compliance and consumer practices has been a key focus of ours.”

That may be true, but as we’ve said before, the way the industry’s rules and regulations are structured, it’s almost certain conduct like this will happen again and again.