The Consumer Financial Protection Bureau held an Auto Finance Forum earlier this week to discuss the discrimination that can occur in auto lending. In particular, it addressed the issue that some consumers end up paying higher interest rates on their car loans not as the result of their credit worthiness, but because of their race or ethnicity. According to the CFPB, the impact of these practices may result in millions of additional dollars for auto lenders.
At the crux of the concern is the way auto dealers sometimes mark up auto loans, and receive financial incentives from the lenders they work with when they charge higher interest rates on car loans. The financial incentives often are not disclosed to consumers when they buy a car and obtaining a car loan interest rate at the dealership. As a result of these practices, the auto lenders might be in violation of fair lending laws.
CFPB analysis of car loan data indicates that these practices can result in African-American, Asian and Hispanic borrowers paying more for their auto loans than non-minority borrowers. Congress has said that while the CFPB does not have jurisdiction over car dealers and their practices, they do have jurisdiction over the largest auto lenders and their lending programs -- both those that lend directly to consumers as well as those that use auto dealers as an intermediary.
Do you think you have ever faced discrimination while getting a car loan?
Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter: @SheDrives.