WASHINGTON, Nov 24 (Reuters) - A leading U.S. consumer watchdog is preparing to sue Santander bank alleging that the Spanish bank overcharged borrowers on auto loans, two sources familiar with the plans said on Friday.
The action by the Consumer Financial Protection Bureau (CFPB) could come as early as Monday, said the sources, who requested anonymity because they were not authorized to speak about the matter.
A Santander spokeswoman, Raschelle Burton, on Friday declined to comment. A spokesman for the CFPB did not immediately respond to a request for comment.
According to the sources, the lawsuit centers on a financial product, known as ‘guaranteed auto protection’ (GAP), that can shield a car buyer from some of the expense of a serious collision.
If a driver’s auto insurance only covers replacement cost, GAP coverage may cover the entire balance of the loan.
Consumers often purchase GAP insurance in the dealer showroom and the costs are built into the car loan.
Federal and state officials have been looking into whether consumers have been paying for unneeded GAP insurance or have seen their loan rates climb too high when GAP coverage was added.
In 2015, Santander Consumer USA Holdings Inc. agreed to pay $5.4 million to Massachusetts drivers who state officials said faced unfair loan terms when GAP coverage was included.
Last month, Reuters reported that a leading bank regulator, the Office of the Comptroller of the Currency, was examining how Wells Fargo administered its auto loan business.
The bank has said previously that it was trying to help any customers who were wrongly charged for car insurance. (Reporting By Patrick Rucker; Editing by Andrew Hay)