The practice of "dealer markups" is accepted in the industry, whereby dealers can apply a surcharge of in order to arrange a loan through a bank and they aren't required to notify anyone that they've applied that surcharge. Ally, for instance, caps the dealer markup at 2.5 percent, but a 2011 study by the Center for Responsible Lending found that the average markup is 2.5 percent. The National Automobile Dealers Association counters that the average rates are between 0.7 and 1.0 percent.
The CFPB apparently also determined that the dealers and Ally divvied up the extra interest payments. Since Ally's paperwork doesn't require a dealer to notify it of race or ethnicity and dealers don't need to make note of the surcharge, the CFPB deemed that the discrimination was not deliberate on Ally's part.
The lack of specifics and publicly available information in a loan agreement like markups, race, ethnicity and the rates offered by the bank meant that the CFPB had to employ a social science technique that uses statistical analysis of surnames to determine race. The National Automobile Dealers Association denied the allegations entirely and issued a statement questioning the methodology used by the CFPB.
The fine breaks down into $80 million in payments to affected consumers who will be notified by the CFPB and an $18-million penalty to the agency. The CFPB is expressly forbidden from investigating dealers, which is why the fine rests on Ally. It is the largest settlement over discriminatory practices in auto lending, a financial market that is doing almost $100 billion in business.