We wrote a couple days ago about interest rate discrimination by car dealers. Auto finance companies permit dealerships to “mark-up” the rates, and that often results in women and minorities paying higher interest rates.
The Consumer Financial Protection Bureau and the US Department of Justice announced a settlement today with American Honda Finance Corporation to settle claims that thousands of African-American, Hispanic, and Asian and Pacific Islanders who bought Honda vehicles paid higher interest rates than white car buyers.
As part of the settlement, Honda will pay $24 million to impacted borrowers whose loans were financed by Honda between January 2011 and July 14, 2015. Those entitled to restitution will be contacted directly by Honda.
Honda has also agreed to change its practices so that car dealers do not have as much discretion to increase interest rates. Previously, Honda dealerships marked-up rates by as much as 2.25 percent. Under the settlement, loans may not be marked up by more than 1.25% for loans of 5 years or less or by more than 1% for longer loans.
The CFPB, in an announcement, stated that:
Today’s action is part of a larger joint effort between the CFPB and DOJ to address discrimination in the indirect auto lending market. In December 2013, the CFPB and DOJ took an action against Ally Financial Inc. and Ally Bank that ordered Ally to pay $80 million in consumer restitution and an $18 million civil penalty.
We applaud the efforts of the CFPB and DOJ to ensure that all consumers are treated fairly and without regard to race or national origin.