More than 40 years After Fair Credit Laws, Racial

Page 2 ~ THE VILLAGER/February 12, 2016
THE COMMUNIQUÉ
www.theaustinvillager.com
More than 40 years After Fair Credit Laws, Racial Discrimination Continues
Toyota Motor Credit to pay $21.9 million for discriminatory practices
our journey towards justice has yet to go.
And when it comes to
credit and financing, racial
disparities remain despite
a 42-year old federal law
By Charlene Crowell guaranteeing fair treatment in lending. Four deEach year obser- cades ought to be long
vances and events offered enough for businesses and
in recognition of Black His- corporations to accept
tory Month offer opportu- and comply with the law of
nities for people of all col- the land.
The Equal Credit Opors and locales to reflect
on the unique experiences portunity Act (ECOA) of
of Blacks both past and 1974 requires financial inpresent. Many of the an- stitutions to ‘‘make credit
nual
observances equally available to all
chronicle progress since creditworthy customers
the passage of laws without regard to sex or
adopted years ago to en- marital status.’’ It is illegal
sure that Black citizens for ‘‘any creditor to disand others of color would criminate against any apenjoy all freedoms and plicant with respect to any
benefits that come with aspect of a credit transaction on the basis of race,
citizenship.
Yet in recent months, color, religion, national oritoo many headlines have gin, sex or marital status,
illustrated how multiple or age.”
The above language
forms of injustice still
plague Black America. seems clear and yet, just
Whether from Ferguson to a few days ago another fiFlint or Chicago to Cleve- nancing arm of a major
manufacturer
land, the barrage of as- auto
saults remind us how far reached a multi-million
dollar settlement with the
Consumer Financial Protection Bureau CFPB) and
the Department of Justice
(DOJ) for its failure to treat
consumers of color fairly.
Toyota Motor Credit
agreed to pay $21.9 million in restitution to thousands of Black, AsianAmericans and Pacific Islander borrowers. These
borrowers paid higher interest rates than White
borrowers for their auto
loans due to the lender allowing dealers to mark up
a borrower’s interest rate
for compensation. Toyota
Credit also agreed to
change its pricing and
compensation system to
significantly reduce the
dealer’s ability to manipulate the interest rate.
“No consumer should
be forced to pay more
money for a loan because
of their race or national
origin,” said U.S. Attorney
Eileen M. Decker of the
Central District of California. “This settlement resolves our claims by providing compensation for
affected consumers and
seeking to ensure that future loans funded by
Toyota reflect equal
terms.”
Last May, Evergreen
Bank Group, based in Oak
Brook, IL settled charges
that it violated the ECOA
by charging Latino and
Black borrowers higher interest rates on motorcycle
financing. The bank
settled the claim by paying $395,000.
Months later in July,
Honda Finance Corporation agreed to pay $24 million on similar violations.
In September, Ohiobased Fifth Third Bank
agreed to pay $18 million
and cooperate with an independent administrator
appointed to identify affected borrowers and distribute restitution.
The largest of the recent cases came two years
earlier when in 2013 Ally
Bank agreed to pay $98
million in civil penalties
and restitution. This enforcement action found
that
approximately
100,000 Black borrowers,
125,000 Latino borrowers,
and 10,000 Asian/Pacific
Islander borrowers paid
higher rates for their auto
loans than similarly situated White borrowers.
Even more troubling, just
one year later Ally paid an
additional $38 million to
borrowers for discrimination that occurred after the
initial settlement.
Despite progress resulting from these recent
enforcement actions, discrimination in the market
remains, says Chris Kukla,
a senior vice present with
the Center for Responsible
Lending (CRL).
“The terms of the
settlement continue to
move in the right direction,” noted Kukla. “However, dealer discretion to
mark up interest rates remains an unfair and hidden practice with continued potential for discrimination. The only effective
way to completely eliminate the discriminatory
impact and the unfairness
of hidden dealer interest
rate markups is to end the
practice altogether.”
At $1 trillion, auto
lending is the third-largest
source of consumer debt,
behind that of mortgages
and student loans. CRL has
also determined through
survey research that even
though Black and Latino
consumers make more of
an effort to negotiate auto
interest rates than others,
they still wind up paying
higher rates.
“Law enforcement
must continue to vigilantly
and swiftly act when they
uncover discriminatory or
unfair lending as they have
done with other enforcement actions,” continued
Kukla. “The recent news
that Ally paid an additional
$38 million in restitution to
compensate borrowers
harmed after Ally’s settlement with the Consumer
Financial Protection Bureau and the Department
of Justice shows that the
issue of discrimination due
to car dealer interest rate
markup is real and needs
to end.”