Credit Acceptance Corporation

Credit Acceptance Corporation has agreed to a $710 million settlement with 40 states and Washington, D.C., that will erase roughly $634 million in remaining car debt for more than 55,000 borrowers. The agreement resolves allegations that the subprime auto lender placed borrowers with low incomes or damaged credit into auto loans it knew many could not afford, with loans originated between November 2015 and November 2025. Under the deal, Credit Acceptance will also pay $60 million in restitution to thousands of other borrowers and a $15.5 million penalty, while denying wrongdoing. New York Attorney General Letitia James said the company preyed on consumers with false promises of affordable loans, and CEO Vinayak Hegde called the agreement constructive, customer-focused and consistent with the direction of regulatory expectations in the industry. Borrowers must be covered by one of the 40 participating states or Washington, D.C., and meet the settlement's criteria for debt cancellation, which include a Credit Acceptance score below 56 and payments equaling at least 13% of monthly income.

Credit Acceptance Corporation announced consent judgments entered into or planned with New York and 40 other attorneys general, resolving the New York litigation filed in 2023 and a multistate investigation begun in 2020 without an admission of wrongdoing. The company will pay $60 million into a consumer relief fund and $15.5 million for the participating attorneys general's investigation, alongside waivers of eligible customer balances, with management saying the monetary components require no additional charges beyond previously accrued and disclosed amounts. State announcements also identify $634 million in debt relief, comprising $388 million for consumers whose vehicles were repossessed and $246 million for those whose vehicles were not repossessed. For qualifying loans originated after December 1, 2025, the consent order requires forgiveness of 95% of the balance remaining after involuntary repossession and vehicle sale, with repossession and sale occurring within 12 or 18 months of origination depending on credit score and payment-to-income eligibility criteria, and the provision covers five years from November 2, 2026. For borrowers with credit scores below 600, the vehicle-price cap is 109% of the highest applicable retail book value, a seven-year period beginning when the requirement is implemented.

StockStory identifies Hamilton Lane and Ameriprise Financial as two financials stocks for long-term investors while recommending selling Credit Acceptance. Hamilton Lane, an investment management firm specializing in private markets, posted annual revenue growth of 17.3% over the last five years and earnings per share growth of 22.6% annually over the last two years. Ameriprise Financial, a provider of financial planning and wealth management, achieved annual earnings per share growth of 20.8% over five years and a return on equity of 65.2%. Credit Acceptance, an auto financing company for consumers with limited credit histories, saw flat earnings per share over the last two years despite revenue growth, and its 2.7% annual revenue growth over five years lagged the typical financials company.

Credit Acceptance faces cautionary signals following its first-quarter earnings, with analysts pointing to sluggish long-term revenue growth of just 2.7% annually over five years and earnings per share expanding at only 1.3% per year. The company also carries a heavy debt load, reporting $6.41 billion in debt against just $25.7 million in cash, resulting in a net-debt-to-EBITDA ratio of 9.9 times. Despite a 35.6% stock return over the past six months that outpaced the S&P 500 by 27.3 percentage points, the shares now trade at 12.7 times forward earnings, suggesting much of the good news is already priced in. Analysts recommend looking elsewhere for better opportunities.

The subprime auto loan delinquency rate began 2026 at around 6.8%, its worst level in 32 years. The 60-day delinquency rate remains elevated, higher than during the Great Recession, signaling ongoing stress for lenders focused on high-risk borrowers. Companies like OneMain Holdings and Credit Acceptance have reported weakening credit metrics, with OneMain's charge-offs rising to 8.02% year over year and Credit Acceptance seeing underperformance in loans originated from 2021 through 2026. In contrast, Capital One Financial, which maintains a more stringent lending approach, saw its combined 30-day delinquency rate decline to 3.24% and its auto loan delinquency rate drop to 4.21%, while delinquency rates for higher-quality auto loans remain near historically low levels.

The 20 consumer finance stocks tracked by StockStory reported a satisfactory first quarter, with revenues beating analysts' consensus estimates by 1.9% and next quarter's revenue guidance coming in 0.7% above expectations. Credit Acceptance posted revenues of $406 million, up 1.4% year on year but missing estimates by 13.1%, while Sallie Mae delivered the best performance with revenues of $560 million, down 3.6% year on year but beating estimates by 3.9%. Nelnet was the weakest, with revenues of $353.2 million, down 7.1% year on year and missing estimates by 20.4%. Ally Financial reported revenues of $2.18 billion, up 5.5% year on year and beating estimates by 1.8%, and Affirm posted revenues of $1.04 billion, up 32.6% year on year and beating estimates by 4.3%. Share prices of the group have been resilient, rising 7.2% on average since the latest earnings results.