African-Americans that bought a new vehicle financed by Ally Financial Inc might have been paying higher interest rates than white customers with comparable credit scores.
Claims that Ally Financial’s manner of paying dealerships to arrange automotive financing led to minorities paying more will cost the bank $98 million.
Ally Financial, head quartered in the Renaissance Center pictured above, was accused of practices that led to higher interest rates for minorities buying a new vehicle than white customers with similar credit ratings. An agreement was reached today between Ally and the U.S. Consumer Financial Protection Bureau after it said that on average, African-American consumers paid $300 more in interest over the life of the loan.
Ally hasn’t admitted fault in the settlement, but will pay to end the dispute.
“Ally does not engage in or condone violations of law or discriminatory practices, and based on the company’s analysis of its business it does not believe that there is measurable discrimination by auto dealers,” the company said in a statement. “Regardless, Ally takes the assertions by the CFPB and DOJ very seriously and has agreed to the terms in the orders.”
The band also pointed out that it buys installment contracts from dealers and doesn’t receive information on race or ethnicity.
Today’s news signals that the CFPB is serious about policing the automotive lending market. Lenders are being put on notice about “dealer reserve,” a practice that involved agreeing to finance at a certain rate but allowing the dealer to tack on additional interest that it keeps.
[Source: Automotive News]