The local paper is singing the praises of the new owner of the Carolina Hurricanes, Tom Dundon. WRAL Sports Fan The News and Observer’s Luke DeCock and Chip Alexander lauded the “self-made billionaire” in an adoring story today:
Dundon, 46, has no background in professional sports but knows how to operate a successful business and already has analyzed much of the Hurricanes’ organization and operation. He also likes to win.
Let’s talk about this “self-made billionaire” who “knows how to operate a successful business.” Dundon’s successful business was Santander Consumer Holdings USA, the subprime auto lending arm of the Spanish bank, Santander. Dundon founded the business and ran it until July 2015, when he stepped down just as the regulatory heat was being turned up on Santander. Santander Consumer is in the subprime auto loan business, making what some say is 1 out of every 5 loans. For those of you who didn’t see the film The Big Short or slept through the 2008 recession, America’s economy was nearly ruined by the kind of loans lenders like Santander made.
Santander’s business model was piling debt onto people with poor credit – the working poor barely making ends meet who could scarcely afford a car loan, much less one with a 20% interest or more. Last summer, Massachusetts Attorney General Maura Healey announced a $26 million settlement with Sandander’s subprime auto loan division to settle allegations of giving high-interest loans to car buyers it knew could not repay them. From AG Healey’s press release:
“After years of combatting abuses from subprime mortgage lenders, these practices are unfortunately familiar,” said AG Healey. “We found that Santander, a leading player in the business of packaging and reselling subprime auto loans, funded unfair and unaffordable auto loans for more than 2,000 Massachusetts residents. This first-in-the-nation settlement relating to subprime auto loan funding will provide relief to thousands of car buyers in Massachusetts and prevent these practices from being used against our residents.”
… and from the Boston Globe:
Santander’s practice of working with car dealerships that falsified or inflated borrowers’ incomes was “outrageous,” said Massachusetts Attorney General Maura Healey in announcing the settlement Wednesday. The bank would then resell the loans, knowing they were unsound, to investors.
“The global economic collapse wasn’t a cautionary tale. It was a blueprint” for Santander, Healey said.
In other words, Dundon made his fortune by ripping off poor people. This makes Dundon a reverse Robin Hood – stealing from the poor and giving to the rich.
Under Dundon’s leadership, Sandander paid a record fine to the Justice Department for illegally repossessing cars of military veterans:
Santander Consumer USA Inc. has agreed to pay at least $9.35 million to resolve a lawsuit by the Department of Justice alleging that the motor vehicle lender violated the Servicemembers Civil Relief Act (SCRA), the Justice Department announced today. The complaint and the settlement, which is subject to court approval, were filed today in the U.S. District Court for the Northern District of Texas.
The settlement covers the improper repossessions of 1,112 motor vehicles between January 2008 and February 2013. The proposed consent order represents the largest settlement for illegal automobile repossessions ever obtained by the United States under the SCRA.
“This is a just resolution that will provide service members with financial relief and help repair their bad credit caused by Santander’s improper repossessions and fee collections with respect to more than 1,100 cars,” said Acting Associate Attorney General Stuart Delery. “The Department of Justice will continue devoting time and resources to protect our service members and their families from such unjust actions and hold bad actors accountable.”
I have little patience with people who kick others when they’re down, amassing huge fortunes by taking advantage of the poor. That’s scumbag behavior. Let’s not paper over Dundon’s checkered path to riches by politely calling him a successful businessman. As far as I’m concerned, he has a lot of atoning to do.
Read more about the subprime auto loan industry in the New York Times story, Investment Riches Built on Subprime Auto Loans to Poor by Michael Corkery and Jessica Silver-Greenberg.