by Byard Duncan and Ryan Gabrielson

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In the spring of 2020, attorneys general from nearly three dozen states announced a landmark legal settlement with the nation’s largest auto lender for risky borrowers.

Santander Consumer USA had for years made high-interest loans to people it knew couldn’t afford them, the officials alleged. When those borrowers got into financial trouble, it allowed them to delay making payments — without disclosing the steep costs of doing so. Because of those extensions, customers ended up owing thousands of dollars in surprise interest charges, and in many cases, they lost their cars.

“Predatory lending practices like this led to the 2008 financial crisis and harmed millions,” Josh Shapiro, then Pennsylvania’s attorney general and now its governor, said in a press release announcing the settlement, which imposed new consumer protections and required clearer disclosure about how loan extensions work.

The multistate effort, he added, “will put a stop to some of Santander’s most outrageous tactics.” The bank did not admit any wrongdoing as part of the settlement, which it said resolved a “legacy underwriting issue.”

But by the time the attorneys general were heralding their crackdown, they were receiving strikingly similar complaints from customers with loans from another lender, Exeter Finance.

The parallels were more than coincidence. The company was being run by former Santander executives who had left that bank amid the investigation. By 2020, most of Exeter’s corporate leadership — including its CEO and its operations chief — was composed of people who had overseen Santander during the period that the state attorneys general said it was “misleading, failing to disclose material information, or otherwise confusing consumers.”

Those elected officials, however, have taken a decidedly different approach with Exeter. In fact, in 12 states that participated in the Santander agreement, officials have taken little or no action in dozens of cases alleging nearly identical behavior, according to a ProPublica investigation.

The news organization reviewed nearly 200 consumer complaints filed with state regulators over the past five years and found they rarely pressed Exeter about its practices. In Washington, they asked Exeter to participate in a voluntary mediation process, then closed the case when the company didn’t respond. In New Jersey, they just forwarded complaints to their counterparts in Texas, where the company is based, and did nothing more. In Kentucky, an office sat on a complaint for months while the borrower’s car was repossessed.

Some attorneys general declined to answer questions for this story, while others — such as those in Pennsylvania, Georgia and California — did not release documents in response to our public records requests. But Prentiss Cox, a University of Minnesota law professor who spent years in charge of consumer protection at the Minnesota attorney general’s office, said attorneys general often have limited staff and money to bring cases against companies, “and you bet players like subprime auto lenders know that.”

At least two states now appear to be scrutinizing Exeter. Georgia has acknowledged investigating the company, and Louisiana recently signaled potential action after ProPublica published the first part of its series last month. In response to questions about Exeter, the state attorney general’s office said it “cannot comment on ongoing investigations.”

Enforcement from attorneys general is particularly significant for auto borrowers, given how little recourse they have for legal action, said Chris Peterson, a law professor at the University of Utah and a former senior official at the Consumer Financial Protection Bureau. Many car loan contracts explicitly limit borrrowers’ right to bring cases in civil courts by forcing them into arbitration. Consumer rights lawyers “often give indirect auto finance companies and car dealers a free pass because it’s so difficult to get them into court anymore,” he said.

That makes state attorneys general one of the few official checks on the country’s trillion-dollar auto lending........

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