Lenders Warn Dealers About Bias

October 2, 2013
Automotive News  
auto financing news

Auto lenders have been sending letters to dealerships to inform them that many of their practices suggest a pattern of discrimination against minorities, women, or the elderly.

Dealers have suggested that the letters were prompted by pressure on the lenders by the federal Consumer Financial Protection Bureau (CFPB), as part of the agency's attempt to extend its oversight to dealers. For their part, dealers universally deny discrimination against customers and criticize the lenders' methodology in determining bias.

The CFPB and the U.S. Department of Justice are also examining major automakers' finance arms for possible discrimination in lending. The agencies have requested information from Toyota Motor Credit Corp., American Honda Finance Corp., and other lenders about pricing practices for loans that the company funds for auto dealers. Letters sent to dealerships by Chase Auto Finance and Bank of America say the dealerships were found to have charged a higher average dealer reserve on loans to protected classes, such as minorities, compared to loans to everyone else. Currently, there does not appear to be a predictable threshold at which a difference in pricing triggers a warning letter. Earlier this year, the CFPB said that it wants auto lenders either to stop letting dealers add points to loans and switch to flat fees or more closely monitor loans made at dealerships.

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