On March 23, 2017, the Federal Reserve Board (FRB) announced an enforcement action with Santander Holdings USA, Inc. and its majority-owned subsidiary, Santander Consumer USA, Inc. This action will require Santander to strengthen its compliance risk management program and improve the oversight by the Board and senior management of the lender’s subprime auto-lending unit. While this action does not explicitly state what laws were violated, it does connect this agreement to a prior action in July 2015 that required the lender to, in addition to other requirements, “enhance its firmwide risk management program.” The action notes that progress has been made since 2015, however, significant deficiencies still exist.

This latest action does mention that other federal and state agencies have cited compliance violations by Santander Consumer. In July 2015, at the time of its prior action from the FRB, the firm revealed in a 10-Q filing that its subprime auto-lending unit was under scrutiny by the Consumer Financial Protection Bureau (CFPB). The CFPB referred to the Department of Justice (DOJ) alleged Fair Lending violations regarding statistical disparities between prohibited basis and non-prohibited basis group borrowers in auto dealer markups and the treatment of sources of income.

The FRB did not issue a fine against Santander. The agreement does require that Santander deliver a plan that includes, among other things:

  • The planned allocation of resources to ensure compliance with consumer laws and regulations;
  • The Board’s actions to maintain effective control over the compliance risk management program; and
  • Descriptions of the roles and responsibilities of Board members and senior managers in assessing compliance risk.