Credit

Credit Acceptance

Modified on January 11, 2024

By Matt Mayerle
May 22, 2023

Credit Acceptance is a lender that offers financing programs to automobile dealers. These financing programs allow people with bad credit or no credit to purchase vehicles with affordable car loans. Typically, subprime borrowers may have a hard time finding approval for personal loans or other traditional sources of financing. This struggle can leave subprime borrowers with predatory lenders with aggressive debt collection methods that force them to face unaffordable monthly payments.

In an effort to help subprime borrowers become vehicle owners, Credit Acceptance has several financing programs auto-dealers can offer these borrowers. However, Credit Acceptance has not been without its fair share of controversy. As recently as January 2023, Credit Acceptance was sued by New York Attorney General Letitia James and the Consumer Finance Protection Bureau.

Here, you will learn everything you need to know about the lender Credit Acceptance.

An Overview: Credit Acceptance Corporation

Credit Acceptance works with over 12,000 automobile dealerships throughout the United States, offering auto financing programs that benefit both the dealerships and the consumers. Through the programs offered by Credit Acceptance, dealerships are able to benefit from the sale of vehicles to consumers with bad credit who wouldn’t be able to qualify for traditional financing.

Community Service

Credit Acceptance also partakes in community service and outreach programs. Some of the community service activities Credit Acceptance has participated in are:

Donating a therapy dog to Oxford Schools.
Writing cards for veterans and making paracord bracelets for active military members.
Raising money for the Cystic Fibrosis Foundation.
Contributing to Ukraine relief.
Donating food to a local food pantry.
Creating blankets for hospital children.
Donating toys and coats to children in need.

Credit Acceptance Investments and Earnings

In addition to offering car dealerships financing programs for subprime and prime borrowers, Credit Acceptance is traded publicly on the Nasdaq Stock Market under the symbol CACC. Credit Acceptance acts in accordance with investor protection laws, ensuring that both the company and its investors participate in the stock market responsibly. In the first quarter of 2023, Credit Acceptance earned a net income of $99.5 million, or $7.61 per diluted share.

Debt Collection Lawsuits

In January 2023, New York Attorney General Letitia James and the Consumer Finance Protection Bureau sued Credit Acceptance for putting thousands of New Yorkers in massive debt. The purpose of this lawsuit was to force Credit Acceptance to adjust its lending practices and loan agreements.

Attorney General James said,

“CAC claimed to help low-income New Yorkers purchase cars, but instead drove them straight into debt. CAC steered hardworking New Yorkers toward financial ruin by tricking them into unaffordable, high-interest auto loans while cutting backroom deals with dealers to protect their own profits. These predatory actions hurt innocent people and left them with mountains of debt. I thank the CFPB for their partnership to stop this harm and protect everyday New Yorkers.”

Rohit Chopra, a director at the CFPB, went on to say,

“Credit Acceptance obscured the true cost of its loans to car buyers, leading to severe financial distress for borrowers and subjecting them to aggressive debt collection tactics on loans its own systems predicted that borrowers can’t afford to repay. The CFPB’s action with the New York Attorney General seeks to end Credit Acceptance’s unlawful practices and makes consumers whole.”

Types of Finance Programs for Auto Loans Offered by Credit Acceptance

Credit Acceptance offers two main types of financing programs for automobile dealerships; the Portfolio Program and the Purchase Program. These programs are available for independent, Buy Here Pay Here (BHPH), and franchise car dealerships. No matter which financing program a dealership chooses, they can enjoy the following features:

Competitive advances for the purchase of new or used vehicles.
Same-day funding when the dealership uses eContracting.
No look-to-book benefits and $100 non-recourse.
Inventory integration that is easy to use.
Compensation for flexible F&I.
Easy integrations for Dealertrack®, RouteOne®, AutoClick, ProMax, and other programs.

Portfolio Program

With the portfolio program, dealers have the opportunity to get paid in a few different ways. Dealerships can choose the “advance” payment option, which results in the dealership receiving payment upfront. This money typically covers the cost of a vehicle, including a modest profit from each auto loan contract.

Dealerships may also choose the “portfolio profit express (PPE)” payment option, which gives the dealership a percentage of the expected collections from a capped pool of auto loan contracts. Typical caps for these auto loan pools may be for 50 to 100 contracts.

Lastly, dealerships may choose the “portfolio profit” payment option, which allows them to receive monthly payments for 80% of the net collections on all contracts in a capped pool after the total Advance balance of that pool is repaid successfully.

Purchase Program

Credit Acceptance also offers a “GOLD financing option” for consumers with a qualifying credit score of 600 or higher. This purchase program can come with benefits such as:

Advances that are competitive.
Approval for virtually every car and customer.
Interest rates that can get as low as 12.99%.
No minimum down payment required.
History or vehicle repossessions are OK.
Chapter 7 bankruptcy is OK, and so is Chapter 13 bankruptcy (with the approval of the court/trustee).

What Can Credit Acceptance Offer Automobile Dealers?

Credit Acceptance offers financial incentives and other perks for the dealerships in their network that include:

Cash flow shares from signed auto loan contracts.
Benefits when customers successfully pay back their auto loan contracts.

These incentives and benefits not only encourage dealerships to offer auto loans to more customers in need but also motivates them to provide quality vehicles and sustainable loan terms, setting customers up for success to pay off their auto loans for a car that is built to last.

How Can Bad Credit Borrowers Benefit From Credit Acceptance?

Credit Acceptance claims to set consumers up for success by connecting bad credit borrowers who may not have been able to find an approval for traditional financing with auto loans. According to Credit Acceptance, borrowers can utilize their services to obtain auto loans, improve their credit score, and increase their chances of receiving approval on traditional loans in the future.

Bad Credit and Past Bankruptcy Is OK

Credit Acceptance works with just about every borrower and vehicle, despite bad credit, no credit, or a history of bankruptcy. In fact, Credit Acceptance may even work with consumers who are currently going through Chapter 7 or Chapter 13 bankruptcy, with court approval, of course.

Potential To Improve Credit Score

Credit Acceptance reports to all three major credit bureaus (TransUnion, Experian, and Equifax). These three credit bureaus collect financial information that consumers can review in their official credit reports. In addition to their financial data, consumers can also view their credit scores in their credit reports.

The financial data that credit bureaus gather for your credit report is typically categorized into five groups. Those groups are payment history, length of credit history, debts owed, hard credit checks, and mix of credit accounts. The most important of these categories is payment history. So, by making consistent and on-time payments on your Credit Acceptacnce auto loan, you can work towards boosting your credit score and improving your credit report.

Better Chance of Approval for Traditional Financing in the Future

Your credit score often plays a major role in determining what types of loans you may find an approval for, what loan amounts you may qualify for, and other details of your loan, like interest rates or repayment terms. By boosting your credit and raising your score, you increase your chances of receiving approval for a wider variety of financing options and deals moving forward!