The agreement will provide a lower interest rate, $500 off the amount owed, and a $500 warranty credit
(DES MOINES) Attorney General Tom Miller said today that MetaBank has agreed to significantly improve the terms of consumer auto loans the bank is attempting to obtain from Dan Nelson dealerships that were located in Des Moines, Council Bluffs and Sioux City. The agreement between MetaBank and Miller's Office will be presented to the Federal Bankruptcy Court in South Dakota for approval.
MetaBank is involved because it led a consortium of banks that financed the Dan Nelson dealerships, which have filed for bankruptcy. The banks are attempting to take control of current consumer auto loans held by South Dakota Acceptance Corporation, Nelson's financing company, also known as Car Now Acceptance Company or CNAC.
Miller said that about 1400 consumers with current CNAC contracts assigned to MetaBank will benefit in several ways if the agreement is approved by the Bankruptcy Court:
- The annual interest rate on loans will be reduced to 18% (now almost all are at 24.95%.)
- The principal amount owed will be reduced by $500 at the end of consumers' loans. (When consumers reach the last $500 in principal owed, their loans will be satisfied and consumers will receive free-and-clear title to the vehicles.)
- MetaBank will provide $500 in warranty coverage to all consumers with current CNAC contracts, even if their Nelson warranty coverage has expired. Warranty coverage will be greater than the Nelson warranty.
- All Nelson contracts for these consumers will be deemed current. Even if consumers haven't made payments for months, they won't have to pay late fees or past-due interest.
Miller said the agreement will result in estimated savings of over $2 million to Dan Nelson customers whose contracts are still active and owned now by CNAC. The agreement applies to vehicles purchased in Iowa, regardless of the buyer's state of residence.
MetaBank also agreed not to pursue collection of millions of dollars in past-due consumer contracts from other consumers, which otherwise would have been sold to debt collectors.
The agreement with MetaBank will become effective upon approval of the United States Bankruptcy Court for the District of South Dakota, where the South Dakota Acceptance Corporation bankruptcy is pending.
"The agreement provides substantial relief to thousands of Iowa consumers," Miller said. "We were very pleased with MetaBank's cooperation. We will continue our efforts to make things right for Dan Nelson customers."
Information for consumers:
Consumers do not need to take any steps to participate in the agreement, and the agreement does not take away any private legal rights or remedies of consumers. The terms of consumers' loans will be changed automatically, if the agreement is approved by the Bankruptcy Court. If it is approved, consumers will receive a letter with more information about the agreement, most likely in September.
Consumers with questions about the agreement with MetaBank may call the Iowa Consumer Protection Division at 888-777-4590 (toll-free) or 515-281-5926, or write to Consumer Protection Division, 1305 E. Walnut St., Des Moines, Iowa 50319, or send e-mail to firstname.lastname@example.org
In January, Miller's office sued Dan Nelson Automotive Group, its financing company South Dakota Acceptance Corporation, and business partners Dan Nelson and Chris Tapken. The lawsuit, filed in Polk County District Court, alleged that the defendants engaged in violations of Iowa consumer fraud and consumer credit laws, and engaged in ongoing criminal conduct in connection with their sales of used motor vehicles in the three cities. (MetaBank is not a defendant in the suit.)
The MetaBank agreement does not affect Iowa's consumer fraud lawsuit, which remains pending. "We alleged in our lawsuit that the defendants substantially harmed consumers," Miller said. "They are out of business now, but they still need to be held accountable for the alleged violations," he said.
"The relief provided by this kind of agreement is especially important because, as our lawsuit alleged, Dan Nelson Automotive targeted vulnerable consumers with marginal credit histories," Miller said. "We alleged that Dan Nelson promised consumers reliable and safe transportation and the chance to build or rebuild their credit, but, in reality, customers often found themselves much worse off, with more debt, worse credit, and no working vehicle. That's why any relief we can provide is especially important."
Miller said his office and MetaBank also entered into a separate agreement-in-principle concerning consumers whose loans on trade-in vehicles were not paid off by the Nelson dealerships. Under the agreement, MetaBank will pay off the consumers' loans on their trade-ins.