Credit Acceptance Corporation
|Company Name||Credit Acceptance Corporation|
|Class Period||November 01, 2019 to August 28, 2020|
|Lead Plaintiff Motion Deadline||December 01, 2020|
On Friday, August 28, 2020, the Massachusetts Attorney General (“AG”) filed a complaint against Credit Acceptance alleging that the Company made unfair and deceptive auto loans to consumers and engaged in unfair debt collection practices. Among other things, the complaint alleged that, since 2013, Credit Acceptance topped off the pools of loans that it packaged and securitized with higher risk loans. It further alleged that Credit Acceptance made high interest subprime auto loans that the Company knew borrowers would be unable to pay, thereby ignoring the likelihood that the borrowers would default on their loans.
On Monday, August 31, 2020, the Massachusetts AG issued a press release announcing the lawsuit and stating that the Company’s “unaffordable and illegal loans” caused borrowers “to fall into thousands of dollars of debt and even lose their vehicles.”
On this news, the Company’s share price fell $85.36, or 18%, to close at $374.07 per share on September 1, 2020, thereby injuring investors.
The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors: (1) that the Company was topping off the pools of loans that they packaged and securitized with higher-risk loans; (2) that the Company was making high interest subprime auto loans to borrowers that the Company knew borrowers would be unable to repay; (3) that the borrowers were subject to hidden finance charges, resulting in loans exceeding the usury rate ceiling mandated by state law; (4) that the Company took excessive and illegal measures to collect debt from defaulted borrowers; (5) that, as a result, the Company was likely to face regulatory scrutiny and possible penalties from various regulators or lawsuits; and (6) that, as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
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