Report: CFPB Sending Ally Settlement Checks To Wrong Parties

January 26, 2016 0 Comments

The Consumer Financial Protection Bureau (CFPB) has made headlines for their interest in auto lending. The government entity’s largest fine against an auto lender, Ally bank is still a source of controversy.

We reported previously about the CFPB’s decision to go after Ally bank over alleged disparate impact discrimination. The concern on the part of the CFPB was that auto lenders were discriminating against non-white borrowers, over 235,000 of them. The remedy for this allegation of discrimination was to require Ally bank to payout $80 million to those consumers who were potentially harmed from the auto loan discrimination.

We also told you about how Charles River Associates broke down the CFPB’s proxy methodology for determining the race of consumers who took out auto loans. The findings on the part of CRA were that the proxy methodology employed by the CFPB is heavily flawed and both struggled to identify minorities and produced “false positives,” in which minorities were falsely identified.

Fast-forward almost a year and the CFPB action against Ally bank is still under scrutiny. The U.S. house committee on financial services noted in an official release, “The (CFPB) is distributing $80 million in settlement proceeds from its enforcement action…without verifying that recipients are eligible to receive the money.  The result is some white borrowers are getting settlement checks over alleged racial discrimination against African-Americans, Hispanics and Asians.”

The great concern according to members of congress and numerous media reports is that the CFPB is sending out checks to Caucasians who were not supposed to be part of the $80 million settlement. The apparently clumsily handling of the settlement disbursement only adds to doubts about the entire claim against Ally bank.

While it was alleged that the CFPB struggled to correctly identify certain racial groups using their proxy methodology, reliable sources indicate it’s now clear the government group is struggling to find the right individuals to send checks to.

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