The Consumer Financial Protection Bureau has issued a warning to lenders cautioning them against discriminating against certain car buyers by unfairly marking up loans. The federal agency says the practice could unnecessarily cost consumers tens of millions of dollars annually.
The practice occurs when a consumer obtains a car loan through an auto dealer who sources the loan from a third-party lender, the CFPB says. These lenders generally allow dealers to offer a rate that is higher than the car loan interest rate they offer to the consumer in a process that is often called "dealer markup." The discrimination occurs when the dealer selects a rate that is higher than the rate for another customer in a similar situation due to the customer's race, ethnicity, gender, age or other factors that are considered discriminatory.
The CFPB, which was formed after the Wall Street collapse in 2008, does not have jurisdiction over auto dealers, but it does over indirect lenders, so its warning encourages these lenders to take steps to ensure the car dealers they work with remain compliant with fair lending laws.
Have you had difficulty with a car loan? Were you ever treated unfairly by a car dealer?
Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both 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.