Published: April 2018

Last-ditch effort to prevent auto lending discrimination fails

Consumer Action and its allies wrote to Congress on April 16 to plead that it not interfere with the Consumer Financial Protection Bureau’s efforts to prevent auto loan discrimination. The Bureau’s “guidance” to car lenders sought to end a common discriminatory practice to charge some borrowers more in interest and fees, regardless of their creditworthiness (“dealer mark-ups”). Even though these discriminatory violations still occur, the Senate on April 18 moved to eliminate the 2013 guidance document, allowing the practice to continue. These discretionary auto dealer mark-ups result, in some cases, in African Americans and Latinos paying more than similarly situated white borrowers.

The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status or age. However, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice both concluded that several auto financers' policy of giving dealers discretion to mark up the interest rate of auto financing resulted in discrimination against minority borrowers.

The CFPB provides guidance that helps lenders comply with the ECOA and avoid charges of discrimination. The Bureau has urged all auto financers to move to a method of compensating auto dealers that does not result in disparate impacts on minority borrowers. However, as part of its attack on the CFPB and on efforts to weed out racial discrimination in financial services, Congress is moving to repeal the Bureau’s auto loan guidance.

Consumer Action stands with civil rights and consumer advocates in urging the Senate to oppose the auto lending Congressional Review Act resolution (S.J. Res 57). Congress should be working to end the lending injustice that still exists today, not interfering with efforts to enforce fair lending laws.

Lead Organization

American's for Financial Reform (AFR)

Other Organizations

Americans for Financial Reform | Allied Progress | Center for Economic Integrity | Center for Popular Democracy | Center for Responsible Lending | Consumer Action | Empire Justice Center | Genesee Co-op Federal Credit Union | The Leadership Conference on Civil and Human Rights | NAACP | National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low income clients) | National Fair Housing Alliance | National Urban League | National Consumers League | NC Justice Center | Public Citizen | Public Justice Center | Public Law Center | Tennessee Citizen Action | UnidosUS | U.S. PIRG | Woodstock Institute

More Information

For more information, please visit AFR.

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Last-ditch effort to prevent auto lending discrimination fails   (Auto-Lending_CRA_Opposition_Statement.pdf)