December 10, 2018

By Steve Wishnia

DALLAS, Tex.—The Communications Workers of America’s efforts to organize workers in the financial industry helped uncover widespread deceptive practices by the nation’s leading subprime auto-loan lender—while the company was aggressively pushing its workers to sell more loans.

Santander Consumer USA, the Dallas-based affiliate of the Spanish Banco Santander, agreed in November to settle complaints to the federal Consumer Financial Protection Bureau by paying $2.5 million in fines and $9.3 million in restitution to heavily indebted consumers who’d purchased inadequate “guaranteed asset protection” (GAP) insurance.

According to the consent order, Santander Consumer, which holds more than 30% of the subprime auto loans issued in the U.S., had told borrowers that its S-GUARD GAP insurance policies would protect them from owing money if their car was destroyed in an accident—but they actually covered only 125% of the vehicle’s estimated value, so if the totaled car was worth $4,000 and the owner owed $12,000, they’d still be on the hook for $7,000. The $9.3 million restitution will go to about 3,500 customers whose insurance wasn’t enough to pay off their wrecked cars.

AFL-CIO senior researcher Molly McGrath, lead author of “Wheeling and Dealing Misfortune,” a 2017 report on Santander issued by the AFL-CIO and the National Law Employment Project, suspects that Mick Mulvaney, the CFPB’s Trump-appointed acting director, significantly softened the settlement: His chief of staff is a former Santander lobbyist, she notes. The $11.8 million payment is less than half the $26 million Santander agreed to pay in early 2017 to settle complaints by the attorney generals of Massachusetts and Delaware that it had issued high-interest loans to consumers it predicted wouldn’t be able to pay them, packaging them into securities much as banks did with subprime mortgages before the financial crash of 2008. The CFPB order also does not include refunds for the more than 2.3 million people who took loan extensions without being told that they would increase the ultimate cost of the loan.

Had the consent order been issued under Richard Cordray, the bureau’s head from 2013 until he resigned under pressure in November 2017, McGrath told LaborPress, “the number would have been a lot higher.” Nevertheless, she says, “this would not have come to light if the workers hadn’t complained.”

The Santander Consumer story, former workers and organizers say, is not just about deceptive loans to consumers. As the company expanded rapidly—its loan portfolio growing at least tenfold in a decade, to $53 billion in 2017, according to “Wheeling and Dealing Misfortune”—intense pressure and surveillance on workers were embedded in the business model.

“Their debt-collection practices were really aggressive,” says McGrath.

Santander Consumer did not respond to a request for comment from LaborPress. The company employs about 5,000 people in its U.S. loan business, about one-third in debt collection, according to “Wheeling and Dealing Misfortune.”

They didn’t want us to give out too much information or assistance, especially with all of the calls recorded. They told us to stick to the script and get people to pay.” — Quarlondra Coleman, former Santander debt collector

It’s the only one of Banco Santander’s operations countries including Spain, Germany, Mexico, and Chile that’s not unionized, says Annise Porter, a CWA organizer working with the Committee for Better Banks, the CWA-community group coalition trying to organize bank workers. According to federal Bureau of Labor Statistics figures from 2017, finance and insurance are one of the least unionized occupations in the private sector, with barely 3% of 9 million workers represented by unions.

At Santander Consumer, workers are expected to make 12 to 15 calls an hour and are ranked by how many loan extensions they can persuade customers to accept, Porter adds.

“We had a scorecard that ranked us on how we performed on our collections metrics,” Quarlondra Coleman, a former debt collector at Santander’s main call center in the Dallas-Fort Worth suburb of North Richland Hills, told Congress in 2017. “Collectors would be pressured to get a payment from every customer contact.”

“We had to deal with a lot of loans that were damaging to the customer in the long term,” she added—and the company would approve loans “with pressure from upper management” that were obviously fraudulent. “For example, they had to know that a senior who is 85 to 90 years old wouldn’t go out and get a 2016 Camaro. But, there I was calling folks to collect on loans they weren’t aware of! Santander did not want us to speak to them about all the possible ways to solve the problem. They didn’t want us to give out too much information or assistance, especially with all of the calls recorded. They told us to stick to the script and get people to pay.”

The loan extensions enabled the company to keep the loans on the books as a viable asset rather than writing them off as bad debts, says Jerry Robinson, who worked at Santander Consumer for six years before retiring to join the Committee for Better Banks campaign in 2016, and the deferred payments are also deducted from any GAP payouts.

“It puts pressure on the employees to try to collect money that’s not there” from customers, he explains. “The chances of them paying it off are very slim, but you’d be surprised at how people strive to keep their car.”

Santander’s subprime loans have interest rates of 18% to 28% and sometimes more, Robinson told Congress in 2017, with payments typically $500 to $800 per month—often more than a third of the customer’s income.

“Most of their loans are really upside-down,” he says—the auto-loan equivalent of an “underwater” mortgage, owing more than what the car is worth. But even if the vehicle gets repossessed, he adds, the loan is worth more to the company than selling it at auction. If workers can “put the customer back in the car” by persuading them to make a payment or take a loan extension, it can both keep the loan on the books and charge additional fees.

Santander also insured loans from dealers who’d inflate the car’s value by falsely claiming it had extra features, he adds. It didn’t investigate those claims, so it only found out when the car was repossessed or totaled.

“These are things I saw first-hand,” Robinson says. The speedup means “they don’t have customer service”; customer-service calls have “turned into harassment.”

Organizing has won some victories, Porter says. Workers have been able to expose favoritism and discrimination. They got Santander to modify the Call Miner voice-monitoring software that automatically rated workers as speaking in rude tones. And so far, the company hasn’t retaliated against the workers who went to Congress last year—“knock on wood and cross our fingers.”

Now, she says, the main goal is to win a neutrality agreement, in which the company promises not to campaign against union-organizing efforts.

“We know that workers want to see change, but there’s a lot of fear,” she says.