Item 8.01. Other Events.
Credit Acceptance Corporation (the "Company", "Credit Acceptance", "we", "our"
or "us"), in connection with disclosures the Company expects to make to
prospective investors in a potential debt offering, is reporting the following
updates to legal matters:
On October 2, 2020, a shareholder filed a putative class action complaint
against the Company, its Chief Executive Officer (now former Chief Executive
Officer), and its Chief Financial Officer (now Chief Executive Officer) in the
United States District Court for the Eastern District of Michigan, Southern
Division, alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, based on alleged
false and/or misleading statements or omissions regarding the Company and its
business, and seeking class certification, unspecified damages plus interest and
attorney and expert witness fees and other costs on behalf of a purported class
consisting of all persons and entities (subject to specified exceptions) that
purchased or otherwise acquired Credit Acceptance common stock from November 1,
2019 through August 28, 2020. On May 28, 2021, the court issued an opinion and
order appointing lead plaintiffs and lead counsel. On July 22, 2021, the lead
plaintiffs filed an amended complaint asserting similar violations, seeking
similar relief and expanding the putative class to include all persons and
entities (subject to specified exceptions) that purchased or otherwise acquired
Credit Acceptance common stock from May 4, 2018 through August 28, 2020. On June
14, 2022, the Company reached an agreement in principle to settle this putative
class action. The agreement in principle contemplated an aggregate cash payment
by the Company of $12.0 million to settle claims brought on behalf of all
persons and entities that purchased or otherwise acquired Credit Acceptance
common stock from May 4, 2018 through August 28, 2020. On August 24, 2022, the
parties executed and filed with the court a definitive stipulation and agreement
of settlement, referred to herein as the settlement agreement, which was
consistent with the agreement in principle and provides for a full release of
all claims against all defendants, including the Company and its officers. The
settlement agreement provides that the defendants expressly deny any liability,
wrongdoing or responsibility. On September 19, 2022, the court entered an order
preliminarily approving the settlement agreement and scheduled for December 7,
2022, a hearing to consider final approval. The settlement agreement provides
that, upon final court approval of the settlement agreement, the litigation
would be dismissed with prejudice. At this time, there can be no assurance that
the court will grant final approval of the settlement agreement and that the
litigation will be finally resolved in accordance with the settlement agreement.
We have estimated a probable loss of $12.0 million, all of which was recognized
as a contingent loss during the second quarter of 2022, in connection with this
litigation.
On May 7, 2019, the Company received a subpoena from the Consumer Frauds and
Protection Bureau of the Office of the New York State Attorney General, relating
to the Company's origination and collection policies and procedures in the state
of New York. On July 30, 2020, we received two additional subpoenas from the
Office of the New York State Attorney General, both from the Consumer Frauds and
Protection Bureau and the Investor Protection Bureau, relating to the Company's
origination and collection policies and procedures in the state of New York and
its securitizations. On August 28, 2020, we were informed that one of the two
additional subpoenas was being withdrawn. On November 16, 2020, we received an
additional subpoena for documents from the Office of the New York State Attorney
General. On November 19, 2020, the Company received a letter from the Office of
the New York State Attorney General stating that the New York State Attorney
General was considering bringing claims against the Company under the Dodd-Frank
Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), New York
Executive Law § 63(12), the New York Martin Act and New York General Business
Law § 349 in connection with the Company's origination and securitization
practices. On December 9, 2020, we responded to the New York State Attorney
General's letter disputing the assertions contained therein. On December 21,
2020, we received two additional subpoenas from the Office of the New York State
Attorney General, one relating to data and the other seeking testimony. On
February 24 and April 30, 2021, we received additional subpoenas from the Office
of the New York State Attorney General seeking information relating to its
investigation. On August 23, 2022, we received a letter from the Consumer Frauds
and Protection Bureau of the Office of the New York State Attorney General
stating that the Office of the New York State Attorney General intends to
commence litigation against the Company asserting violations of New York
Executive Law § 63(12) and General Business Law §§ 349 and 352 et seq. and
applicable federal laws, including but not limited to claims that the Company
engaged in unfair and deceptive trade practices in auto lending, debt collection
and asset-backed securitizations in the State of New York in violation of the
Dodd-Frank Act, New York Executive Law § 63(12), the New York Martin Act and New
York General Business Law § 349, and seeking to obtain injunctive relief,
restitution, civil penalties, damages, disgorgement, reformation, rescission,
costs and such other relief as the court may deem just and proper. We cannot
predict the eventual scope, duration or outcome of this investigation or the
scope, duration or outcome of any such litigation at this time. As a result, we
are unable to estimate the reasonably possible loss or range of reasonably
possible loss arising from this investigation or any such litigation. The
Company intends to vigorously defend itself in any such litigation.
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