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.”
The risky loan terms that Santander pushes seems to draw especially high-risk borrowers, according to the report: “In 2016, the average term for Santander’s loans was 70 months and the average customer payment to income ratio was more than 10 percent. With loans like this, borrowers get ‘upside down’ on their loans very quickly.”
Workers are reportedly given a scripted dialogue and timetable for tracking repayment, escalating pressure on consumers to pay with each passing week. Workers in turn are assessed by a mechanized scoring system, which constantly monitors calls to allow supervisors to “scrutinize employees’ adherence to their scripts” using software that “inspects their speech for potential problems. For example, if collectors’ calls use less than fifty words in a conversation that they log as a customer’s promise to pay.”
In the ruthless customer-service boiler room, collection workers are driven to incrementally intensify demands for repayment, even as the long-term loan costs accumulate while repayment drags on. Eventually many face threats of car repossession. Losing basic transportation access might lead to further economic devastation, as debtors cannot even drive to work.
It’s a high moral cost to pay for what Santander workers earn each day, with base wages so low that workers are often forced to chase performance incentives to keep up their extra pay, or to avoid possible termination.
While collectors clearly aren’t as vulnerable as borrowers in this dynamic, CBB argues that, at just about $15 to $20 an hour (one online survey pegged customer service representatives wages at under $13 an hour), many workers can’t cover basic needs (to say nothing of the wildly unequal ratio of CEO pay to what front-line employees earn doing Wall Street’s dirty work).
Santander, however, argues that such monitoring methods are not unethical and are “standard” industry practices. A statement sent to The Nation insists that the company maintains an “employee-friendly workplace” with “zero tolerance for employee or dealer misconduct,” and that union organizers were trying to “unfairly discredit Santander to further their own agenda.”
Santander vowed to reform its practices following a recent $26 million settlement over allegations of unfair subprime auto-lending schemes. But the entire structure of the industry arguably allows the company to act as “both a first-party creditor and a debt buyer,” placing staff in a position of giving advice that may be against customers’ best interest. Instead, recalled one worker, the point is to serve the bank’s interest by keeping borrowers, and to an extent staff, in the dark: “You want me to find out what caused them to fall behind, and you know they’re out of work, but if they’ve been out of work two years, that’s different. I can’t be an effective collector…if I can’t say certain things.”
The scripts reportedly instruct workers on how to professionally apologize to quell their customers’ anxieties or complaints about service. Workers are trained to “reassure customers that everything will be fine.” One interviewee describes feeling “so powerless and worn down after their shift that they needed hours to decompress every day.”
Chronic powerlessness is a typical behavioral pattern seen in many workplaces: a sense of helplessness rooted in being subjected to a system of discipline masked as fairness. The subprime-lending industry seems to have that down to a science—pitting struggling bank workers against clients struggling hourunder a crush of unsustainable debts.
Under this cycle of impossible risks and perverse rewards, it’s always the boss who wins at the public’s expense.