GRABAR LAW OFFICE INVESTIGATES POTENTIAL SHAREHOLDER ACTION ON BEHALF OF CURRENT SHAREHOLDERS OF CREDIT ACCEPTANCE CORPORATION (NASDAQ: CACC)
Current Credit Acceptance Corporation (NASDAQ: CACC) shareholders who have held shares of the Company’s stock since at least November 1, 2019, have standing to seek corporate reforms, the return of funds back to company coffers and potentially a court approved incentive award if appropriate.
Credit Acceptance Corporation, one of the largest U.S. subprime auto lenders, has recently agreed to pay $27.2 million to resolve claims by Massachusetts' attorney general that it misled investors and that it engaged in a variety of unfair practices relating to the company’s role in the origination, collection, and securitization of high-interest subprime auto loans to borrowers that the company knew borrowers would be unable to repay.
Specifically, the AG’s now settled lawsuit alleged that CACC made high-interest subprime auto loans that it knew or should have known many borrowers would be unable to repay. The AG’s lawsuit noted that while the company profited from these loans, borrowers experienced credit harm, and, in some instances, lost their vehicles or down payments. The complaint also alleged that some CAC borrowers were subject to hidden finance charges, which resulted in violations of the state’s 21 percent usury cap and that CAC engaged in unlawful collection practices. The AG’s lawsuit also contained allegations that CAC failed to inform investors that it topped off securitization loan pools with higher-risk loans.
Unlike a class action, brought on behalf of damaged investors, a shareholder derivative action is an action brought by a shareholder of a public company on behalf of and for the benefit of the company itself against the directors and/or officers of that company. In a derivative action, shareholders “step into the shoes” of the directors and officers of a company and bring litigation that the board would be unwilling to pursue on its own.
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