The Consumer Financial Protection Bureau is readying a crackdown on interest-rate markups that automobile dealers tack on to the cost of vehicle loans. Through a practice known as dealer participation, the dealer typically retains most of the markup -- which usually ranges from 2. to 2.5 percentage points. Critics have drawn parallels between these inflated costs and the yield spread premiums --now illegal -- that mortgage brokers received during the housing bubble. The CFPB is looking into whether auto dealers are imposing the markups in a discriminatory way, with a gap between average interest rates charged to minority borrowers and those charged to non-minority borrowers. "We know the practice has historically been found to affect people of color more than others," according to the regulator. "There are also concerns about the costs to consumers and the transparency of the practice."
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