Last Thursday, the Hurricanes officially announced that owner Peter Karmanos had sold a majority stake in the franchise to Thomas Dundon. Dundon bought 61 percent of the team, paid a reported $420 million, and has the option to buy the rest of the franchise in three years. He’s boys with Tony Romo and Mark Cuban and he’s 43 years old.
So, where did he make all his money? Lost in all the typical bluster that occurs whenever a team gets a young new owner—“He loves business! He works hard! He’s gonna shake things up around here!”—is the fact that Dundon could afford to buy the team because he made a fortune ripping off vulnerable people. Here’s a paragraph from a recent, adulatory Raleigh News & Observer profile that is somehow presented as a reason to trust Dundon:
He started over as a back-room finance associate at a used-car dealership, quickly figuring out that there was more money to be made in financing used cars than selling them – especially to people with bad credit. They could be charged high interest rates, but they’d still do whatever they could to make the payments, because if their cars were repossessed, they’d often lose their jobs. That kept default rates down. Dundon made millions.
Dundon founded a subprime auto loan company in 1992 and sold it to Santander Bank in 2006. The sole purpose of Dundon’s company, in its various iterations, was to provide loans to customers with bad credit so that they could buy cars. According to regulatory filings, they’d offer loans with interest rates as high as 29 percent to customers the company knew would have a hard time repaying their debts. Because of the necessity for even the most vulnerable Americans to own a car in order to work, Drive Financial and Santander were able to take advantage of their customers’ desperation and lock them into predatory loans, the same sort that led to economic collapse a decade ago. As Jalopnik’s Ryan Felton noted this summer, they knew exactly what they were doing:
Santander recognized a high rate of Massachusetts consumers had loan applications that contained inflated incomes, but still continued to fund the loans, according to the settlement document. Santander estimated that 42 percent of subprime loans created in Massachusetts between 2009-2014 have already defaulted or will end in default, the document says.
While Dundon was enriching himself, his company’s aggressive hawking of dangerous loans was driving desperate customers to financial ruin. As of the third quarter of 2017, Americans owed a total of $1.21 trillion in auto loan debt, and Santander is the biggest player in the market. Dundon resigned from Santander in 2015 as the bank faced intense regulatory scrutiny over its subprime lending practices, and last March, Santander reached a $22 million settlement with the state of Massachusetts “for its role in facilitating unfair, high-rate auto loans for thousands of Massachusetts car buyers.” Dundon got an exit deal from Santander last November and his cashout was $713 million.