Credit Acceptance Corp. has agreed, “in principle,” to pay $12 million to settle a lawsuit brought by shareholders.
The subprime auto lender announced the proposed settlement in the federal securities case — brought by various pension funds — Thursday morning in a regulatory filing, writing that “the parties have agreed to negotiate in good faith to execute a definitive stipulation of settlement to be filed with the court.”
That process “may take several months,” according to the 8-K filing.
The lawsuit was filed in October 2020 in federal court in Detroit and brought by a mix of pension funds invested in Credit Acceptance (NASDAQ: CACC), and named as defendants former CEO Brett Roberts and current CEO Ken Booth.
A Credit Acceptance spokesperson did not immediately respond to a request for further comment Thursday morning.
The lawsuit brought by shareholders largely stemmed from a 2020 case brought by the attorney general in Massachusetts, which among other things alleged that the auto lender did not inform investors that the company had topped off the pools of loans they packaged and securitized with higher-risk loans, despite claiming otherwise in disclosures to investors.
The shareholder plaintiffs, in their 2021 amended complaint, wrote that Credit Acceptance’s “wrongful acts, omissions, and scheme to defraud, and the precipitous decline in the market value of the Company’s common stock” meant the shareholders had “suffered significant damages.”
Credit Acceptance in September finalized a $27.2 million settlement with the state of Massachusetts over that lawsuit.
For 2021, Credit Acceptance reported total net income of just more than $958 million on revenue of more than $1.85 billion. The company’s net income net income more than doubled from 2020 to 2021. The latter year’s profit was an increase of 46 percent compared with 2019 net income.
Booth, Credit Acceptance’s current CEO, topped this year’s Crain’s Detroit Business list of highest-paid public company CEOs in metro Detroit, with total compensation of more than $30.5 million.