Consumer Finance Insights
September 29, 2015

CFPB & DOJ Settle with National Bank Over Auto Lending Practices

On September 28, 2015, the CFPB ​and DOJ announced a consent order and settlement with a national bank to resolve allegations that the bank’s auto lending practices violated ECOA.  The bank allegedly allowed its auto dealer partners to charge a “dealer markup” as high as 2.5 percent above the risk-based interest rate set by the bank.  The auto dealers had discretion to charge different rates regardless of the creditworthiness of the consumer.  This discretion resulted in minority borrowers being charged higher interest rates and on average $200 more for their auto loans.  It is alleged that these discriminatory practices took place from January 2010 through September 2015.  The CFPB brought a similar action against another large auto lender this past July.  More information on that action can be found here.

The bank entered into a consent or​der with the CFPB where it agreed to limit dealer markup to 1.25 percent for loans lasting 5 years and 1.00 percent for loans lasting longer than 5 years.  Because of proactive steps by the bank to address discretionary dealer markup, the bank was not assessed any penalties.  The bank has also agreed to pay $18 million in total compensation to the effected borrowers and to hire a settlement coordinator to oversee payments.

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