Santander Consumer USA Holdings Inc. has agreed to pay up to $2.875 million to harmed Delaware consumers, following an investigation by the Delaware and Massachusetts Attorney General offices into the financing and securitization of subprime auto loans.

The investigation, conducted by the Fraud Division of Attorney General Matt Denn’s office in partnership with the Massachusetts Attorney General’s Office, revealed that Santander allegedly funded auto loans without having a reasonable basis to believe that the borrowers could afford them. Santander predicted that a portion of the loans would default and allegedly knew that the reported incomes, which were used to support the loan applications submitted to the company by car dealers, were incorrect and often inflated.

The investigation by Delaware and Massachusetts also revealed that Santander was allegedly aware that certain dealerships had high default rates due in part to the regular submission of inaccurate data on loan applications — most often involving inflated income — but Santander continued to purchase loans from those dealers and, in some cases, sell them to third parties.

Santander will pay $2.875 million into a trust for the benefit of harmed Delaware consumers. A trustee will be appointed to locate and pay restitution to eligible Delawareans who financed vehicle purchases through Santander. Eligible consumers will be contacted by the trustee and the AG’s office regarding the claims process for restitution.

Santander also will pay more than $1 million to the Delaware Consumer Protection Fund, which pays for work on consumer fraud and deceptive trade practice matters and other consumer-oriented investigations and legal actions.

The agreement also requires business reforms by Santander, including: procedures to screen loans originated by Delaware dealers to ensure that they are in compliance with Delaware law and that minimum documentation requirements are met; not waiving those screens or documentation requirements with respect to Delaware dealers identified as high risk; and not selling to a third party any loans purchased from Delaware high risk dealers that have failed a screen or the documentation requirements. Santander also agreed, on a prospective basis, to identify and repurchase subprime loans sold to third parties that it later determines do not comply with Delaware law.

A copy of the agreement with Santander is available at