US regulator prepares to sue Santander bank over car loans – sources

WASHINGTON, Nov 24 (Reuters) – A top U.S. consumer watchdog is set to sue Santander Bank over allegations the Spanish bank overcharged borrowers on car loans, two sources familiar with the matter said on Friday. .

Action by the Consumer Financial Protection Bureau (CFPB) could come as soon as Monday, said the sources, who requested anonymity because they were not authorized to speak on the matter.

A Santander spokeswoman, Raschelle Burton, declined to comment on Friday. A CFPB spokesperson did not immediately respond to a request for comment.

According to the sources, the lawsuit is about a financial product, known as “guaranteed auto protection” (GAP), which can protect a car buyer from some of the costs of a serious collision.

If a driver’s auto insurance only covers the replacement cost, GAP coverage may cover the entire loan balance.

Consumers often purchase GAP insurance in the dealership showroom and the costs are rolled into the car loan.

Federal and state officials have investigated whether consumers paid for unnecessary GAP insurance or saw their loan rates climb too high when GAP coverage was added.

In 2015, Santander Consumer USA Holdings Inc. agreed to pay $5.4 million to Massachusetts drivers who state officials said faced unfair loan terms when GAP coverage was included.

Last month, Reuters reported that a top banking regulator, the Office of the Comptroller of the Currency, was reviewing how Wells Fargo was handling its auto lending business.

The bank previously said it was trying to help customers who were wrongly charged for car insurance. (Reporting by Patrick Rucker; Editing by Andrew Hay)