• CFPB and DOJ Order Indirect Auto Lender to Pay $80 Million to Consumers
  • January 3, 2014 | Authors: Peter L. Cockrell; Brett M. Kitt; J. Scott Sheehan
  • Law Firms: Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Washington Office ; Greenberg Traurig, LLP - McLean Office ; Greenberg Traurig, LLP - Houston Office
  • On December 20th, the CFPB and the Department of Justice ordered one of the largest indirect auto lenders in the United States to pay $80 million in damages to African-American, Hispanic, and Asian and Pacific Islander borrowers as well as $18 million in penalties for alleged violations of the Equal Credit Opportunity Act. The CFPB and DOJ alleged that more than 235,000 minority borrowers paid higher interest rates for their auto loans between April 2011 and December 2013 because of the lender’s pricing system. This represents the largest-ever federal auto loan discrimination settlement.

    The CFPB’s enforcement order follows its March 2013 compliance bulletin in which it warned against the potential discriminatory impact of auto finance structures in which lenders grant auto dealers discretion to mark-up the interest rates they would otherwise charge to consumers.

    In the CFPB’s recent examination of this particular indirect auto lender’s loan portfolio, the CFPB conducted a so-called “disparate impact” analysis which concluded that, as a result of these dealer mark-ups, the aforementioned minority groups paid higher interest rates on their car loans than similarly situated white borrowers.