After evicting hundreds of thousands of families from their homes during the recession, Wall Street is now chasing debtors onto the curb they got kicked to by going after their cars instead, according to an investigation by community and labor groups. Based on reports from whistle-blowers, the analysis describes a workplace culture of aggression and fear for both workers and consumers.
According to the Committee for Better Banks, Santander Consumer USA, which provides about one in five auto loans nationwide, is fiercely pursuing delinquent borrowers who have gotten mired in debt for financial products they cannot afford and should probably have never been sold in the first place. Aggressive debt collectors could be one factor in the tens of thousands of car repossessions that borrowers have endured, which might in turn lead to an even deeper financial crisis by depriving borrowers of perhaps their household’s only valuable asset.
With the value of the subprime auto-loan industry now worth about $26 billion—and shaping up to be the next finance bubble—Santander, along with other big lenders, has come under fire for unethical sales tactics amid the new subprime feeding frenzy. CBB is currently undertaking a push for stronger labor protections and unionization for Santander workers, and describes Santander’s practices as a pattern of duplicitous tactics that both degrades working conditions and exploits clients.
Interviews with current and former Santander workers indicate that the company incentivizes employees to “service” debts by steering borrowers to the costliest, riskiest repayment plans. Under an incentive system that rewards performance based on how rapidly and ruthlessly they can squeeze payments from clients, a pressure-cooker office climate pushes workers to skirt ethical corners. The report found that workers press clients toward obtaining “extensions, temporary reductions in payment plans, and loan remodifications that ultimately generate more interest and fee income for Santander.”
Collection workers recalled being coached on how to deflect customer complaints with placating statements and misleading reassurances about the prospects of resolving their debts. The script is rigidly worded to restrict workers from discussing individuals’ economic situations, with “little time or incentive to provide customers with substantive guidance for their individual situations”—suggesting that the company prioritizes wringing out repayment over protecting the customer’s finances.
According to Molly McGrath, author of the report, “Santander’s metrics and incentive system…directly tie collections practices to keeping consumers in bad loans, whether it is through giving out loan extensions, giving a customer a [stopgap temporary deferment]…or in continually reinstating defaulted loans or giving a customer back a car that had been repossessed.” McGrath observed “an environment where employees may inadvertently steer customers into accepting these loan products without a clear understanding of their risk or impact.”