Credit Acceptance Corporation is one of the leading subprime auto lenders in the US. It provides financing to customers who do not have the best of credit reports. Recently, the company has been in the news for successfully settling a lawsuit brought forward by the attorney general of Massachusetts. The attorney general had questioned Credit Acceptance Corporation’s lending practices earlier. With the successful settlement and conclusion of the issue, Credit Acceptance Corporation’s stock is now looking up. Credit Acceptance Corporation does not have to admit any wrongdoing on its part. Subprime auto loans are an interesting space, especially after the devastating economic effects of the pandemic on the economically weaker sections of the population. The demand for subprime loans is not expected to go down anytime soon. If you are looking for credit services stocks, then companies like Credit Acceptance Corporation could be an interesting proposition.
Subprime Loans and Credit Acceptance Corp
Credit Acceptance Corporation earns a significant portion of its revenue from fees that it charges for its auto loans. It is not the first financial services business to face a lawsuit regarding its lending practices. Banking major Santander was also brought to court by the attorney general of Massachusetts for its lending practices and its securitization of the subprime auto loans. Santander ended up paying $25.9 million as part of the settlement back in 2017. Santander is among the largest packagers of auto loan securities. Credit Acceptance Corporation, however, has struggled in recent times because of the pandemic. The lapse of the federal stimulus program and unemployment benefits has resulted in a reduction in the demand for Credit Acceptance Corporation’s auto loans. If you view the auto lending industry as cyclical, then the current times seem to indicate that things are at the lower end of the cycle. Such a scenario may be an opportunity for investors looking to buy a top financial stock for 2021.
Credit Services Stocks
Credit Acceptance Corporation’s stock is up almost 7% over the month from 15th August to 15th September 2021. The stock was up 17% at one point before cooling down a bit. It last closed at $606.91 on 14th September 2021.