American Honda Finance Corporation Fined $25 Million In Settlement
The Consumer Financial Protection Bureau (CFPB) in conjunction with the Department of Justice has fined the American Honda Finance Corporation $25 million as part of a settlement. The settlement is meant to resolve claims that the finance arm of Honda is responsible for discriminatory lending.
The CFPB and DOJ allege specifically that the American Honda Finance Corporation discriminated against African-American, Hispanic, Asian and Pacific Islander borrowers. The complaint on the part of the government against Honda was that certain races paid more during the course of their loan. Specifically, the investigation found certain racial groups paid $150-250 more over the course of their auto loan as compared with non-Hispanic white borrowers. To give an indication of what we’re looking at, $150-$250 over the course of a 5-year loan would be around $2-$4 per month. The CFPB press release notes that minority borrowers were injured by loans from January 2011 though July 14, 2015.
American Honda Finance Company will have to pay $24 million in damages and $1 million to and financial educational fund to benefit certain racial groups. In addition, according to a CFPBÂ press release, the lending arm of Honda will have to, “Substantially reduce or eliminate entirely dealer discretion:Â Honda will reduce dealer discretion to mark-up the interest rate to only 1.25 percent above the buy rate for auto loans with terms of five years or less, and 1 percent for auto loans with longer terms.” The question is whether or not this move by the CFPB is part of a larger objective to regulate dealerships via enforcement actions.
A recent report from the NADA asks that very question. NADA recently published a leaked memo written to CFPB Director Richard Cordray from his associates. It was leaked by way of American Banker, which reads, “The significant limitation of dealer discretion, which in turn reduces fair lending risk, is one of the goals we have been seeking with respect to the indirect auto matters, and this settlement proposal attains that goal.”
Since it’s inception, the CFPB has been specifically barred from regulating dealers. The question is, will the CFPB one day regulate dealership finance? Why do you think the government sees elimination of dealership financial discretion as a positive for the consumer?
Related Articles
About the Author: DrivingSales News
The DrivingSales News team is dedicated to breaking the relevant and the tough stories affecting car dealers. Have questions for DrivingSales News? Reach the team at news@drivingsales.com.
Warning: count(): Parameter must be an array or an object that implements Countable in /home/pg4b1yzvrqqo/domains/test.drivingsalesnews.com/html/wp-includes/class-wp-comment-query.php on line 399
This is insane. If these people were getting gouged thousands of dollars I would say it makes sense but $2-$4 per month is not worth anyone’s time or money to make a stink over. AHFC isn’t offering a higher rate to different classes. They offer the buy rate to the dealer based on individual credit. The finance manager uses their skill and common sense to mark the rate up a point or two. Sometimes people know better and speak up and end up driving out at the buy rate or maybe at a small bump. Others may not know to ask about rate, some may not have the guts to negotiate it. Whatever the case may be it sounds like the “discrimination” lies in the dealerships F&I office not with the buyers at Honda. Are different races paying more for the vehicle too? Some people may be more educate about the shopping and buying process and I honestly believe that is where the difference may be coming from. Capping dealers margin on rate to a certain degree makes sense but what’s the next step? Capping profits on the sale of the car as well?
Why have you just targeted Honda? I’ve seen an heard about it with all car makers. The consumer must know their credit history and what they should’ve be able to get. We have way to much regulations as it is now. Everyone needs to make a living. And I’m sorry but 2-4 dollars a month? That’s one bottle of beer or less than one pack of cigarettes. And you don’t have to be a “minority” to be charged that. The Internet has killed the business already, it is hard to make a living with all the pricing online for everyone to see. I hope that Honda appeals the verdict, I’m sure they can afford to pay,but why just one manufacturer?