Showing posts with label minority car buyers. Show all posts
Showing posts with label minority car buyers. Show all posts

Sunday, December 22, 2013

Minority Car Buyers Still Pay More For Auto Loans

These two headlines caught my attention yesterday and I just can't let them go; "Ally Paying $98 Million To Resolve Auto-Loan Claims" (Charlotte Observer print version) and "Ally, U.S. Reach $98 Million Settlement Over Lending Bias" (Automotive News web version). Does this bother anyone other than me?

You want to believe that in 2013 race does not play a role in auto financing. Well, you would be wrong. You can't remove car buying from this practice because you can't have one without the other. Ally, as of the first part of 2013, was the largest auto lender in the U.S. Ally purchases retail installment contracts from over 12,000 auto dealers.

These articles go on to say this is the largest auto-loan discrimination settlement to date by the Justice Department and Consumer Financial Protection Bureau. The claim was based on race because other credit considerations taken into account for loan approval, income and credit score, were equal with whites.

According to the decree, for example, on average African-American borrowers
were charged approximately 29 basis points more in dealer markup or approximately $300 over life of contract; Hispanic approximately 20 basis points more in dealer markup or approximately $200 over life of contract and Asian/Pacific Islander approximately 22 basis points more in dealer markup or $200 over life of contract.

About 235,000 minorities were overcharged by auto dealers above the interest rate set by Ally. Auto dealers make their income by freely marketing up Ally's set rate per car buyer.

When will lenders and auto dealers learn? If you know, for certain you were charged a higher interest rate on your car purchase made in 2013 comment here?

Automotive News Article

UNITED STATES OF AMERICA 
CONSUMER FINANCIAL PROTECTION BUREAU CONSENT ORDER