Ally Financial has agreed to pay a $98-million fine to settle an investigation into unfair lending practices overseen by the Justice Department and the Consumer Financial Protection Bureau (CFPB). In an investigation of lending practices in the year after April 2011, the government agencies determined that Ally Financial and Ally Bank charged roughly 235,000 Asian/Pacific Islander, Black and Hispanic borrowers higher interest rates than their credit profiles warranted and higher rates than whites were charged in equivalent situations. The result was that those borrowers paid $200 to $300 more in total interest for the loan.
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.


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  • 53 Comments
      d.hollywood
      • 11 Months Ago
      Cars...housing...businesses. If you're dark skinned in America-and you need money for any of those three (or anything else)...expect to be Black/Brown Taxed or otherwise sandbagged.That's if you get it at all. Stereotype must be maintained to keep the White citizens "comfortable".
        AngeloD
        • 11 Months Ago
        @d.hollywood
        @d.hollywood: What a rich fantasy life you lead. Our economy was brought to the bring of collapse by the Community Reinvestment Act which forced banks to give home loans to unqualified low income, mostly minority applicants. It got so bad that banks were actually being forced to include unemployment, food stamps and welfare as income when qualifying these people for loans.
          tump
          • 11 Months Ago
          @AngeloD
          AngeloD, maybe you're living the fantasy white privilege life and missed this sentence: "charged borrowers higher interest rates than their credit profiles warranted" -- these people WERE qualified just like the white people. This wasn't some "let's feel good for the darkies" financial favor - this was institutionalized racism. Ring your little bell when unqualified people were given loans they couldn't pay, but man up and admit an injustice.
          d.hollywood
          • 11 Months Ago
          @AngeloD
          Not sure what planet you inhabit AngeloD...but I remember our economic collapse being triggered not by the CRA...but by (allegedly competent) lenders throwing STUPID MONEY at (allegedly qualified) middle & upper middle class whites.They then used this money to overpay for overpriced property(ies) with the wink & nudge acknowledgement that things would all pencil out in a sale to some GREATER (usually white) FOOL with more money than sense.Couple that with the HELOC ABUSE that was also winked at.The Aspen ski trips...the Vette...the Harley...the cosmetic surgery.All funded by HELOCs.Rolled into the inflated price of the home.All this stupidity was compounded by (allegedly intelligent) white bankers / traders.(remember derivatives / CDO's?) Harvard /Yale/Stanford...indeed.You would blame our MULTI-TRILLION DOLLAR collapse on the dark-skinned MINORITY in our great nation...really?! Black people...who make up at most 12 percent of the population?! How much of that 12% would even "qualify" under any but the most onerous of "standards"? Get real son.
          clquake
          • 11 Months Ago
          @AngeloD
          I audit banks, and I have never seen banks include food stamps & welfare as income. Unemployment, yes, because as seasonal workers, they normally get this every year, e.g. construction workers. Banks are not forced to lend to anyone, but if they lend in an area, they must consider all applicants in the area, not just the privileged. Not all applicants qualify, and that includes the privileged. CRA does a lot of good things, and tries to level the playing field, you clearly don't know what CRA is.
        Metal Gods
        • 11 Months Ago
        @d.hollywood
        So, allegations of racism based upon giving high risk credit...or allegations of racism for denying credit to high risk, sub-prime clientele? Pick your poison. You can't have it all ways. The American Dream used to be about working hard and making good, not hand outs and complaints. With each master stroke, another stereotype is created. Ive yet to fill out a credit app where the person in front of me has the ability to make a decision. The software looks at ratios. The person types in the numbers. Simple as that.
          d.hollywood
          • 11 Months Ago
          @Metal Gods
          No Metal...not "as simple as that".Otherwise there would be millions of unqualified whites.Those "impartial algorithms" started from an analog base of behavior & custom.The fact that so many whites "qualify" ...to disastrous ends for the rest of us should tell you all you need to know about the reality of it. "The American Dream used to be about working hard and making good, not hand outs and complaints" You have no real recollection of when that was.And your intentional vagueness about who you think the whiners & recipients are is pathetically telling. Try to develop a world view independent of AM radio windbags.
          clquake
          • 11 Months Ago
          @Metal Gods
          The person in front of you is not allowed to make the decision because racial profiling can occur when face to face. Use of software can help alleviate the problem, but in Ally's case, they were charging more for minorities. The software is only as good as the user. I can tell you from experience that the person in front of you determines what rate he thinks you'll be ok with. A few years age, dealership near me quoted me 5.99%, from a particular bank. Another dealership, same manufacturer, same lender, same terms, quoted me 4.99%. The second dealership is in a more diverse area (Boston), first dealership is in a predominately white neighborhood, and I know what this bank offered behind the scenes because I personally know the people who monitor the capital markets and set those rates.
      AngeloD
      • 11 Months Ago
      From the article: "... the CFPB had to employ a social science technique that uses statistical analysis of surnames to determine race." So in other words, there was no evidence beyond this completely fraudulent garbage concocted by the race hustlers at the Obama Dept. of Justice. Another example of Eric Holder looking out for "his people". Sickening to think that hard line racists like Eric Holder are actually in charge of the Dept. of Justice.
      Joe
      • 11 Months Ago
      There is so much more that goes into auto loan rates than "credit profiles." As someone who has been a sales manager and finance manager in the auto industry who has arranged or worked with tens of thousands of loans there is no duplicate application. Two people may have the same credit score but their employment histories, job stabilities or living circumstances are never the same. For subprime lending these factors become increasingly significant. Consider for example the individual's time at current address, this may seam unrelated to an auto rate but the stability demonstrated by someone who has lived at the same address for more than two years demonstrates an ability to budget rent/mortgage and gives the lender security in knowing that if the car needs to be repoed they'll be able to find. In addition to these circumstances, two people may have identical scores with entirely different credit histories, for example I one customer may have a 650 with a bunch of medical collections but has never been late on a car loan where as another customers "650" is do to derogatory auto loans obviously these two customers don't merit the same auto loan rate. All federal tampering is going to do is scr€w the individuals who's circumstances merit a rate better than their "score" deserves. Where I use to be able to negotiate rates with banks to help individuals get lower rates, it's becoming increasingly difficult to do so. Now everyone will end up paying more because old practices were allegedly unfair. How do they even determine this, by scanning names and determining which names are "ethnic" it sounds to me like the only party guilty of racial profiling is the federal agency who has deemed some surnames as "ethnic" I have sold hundreds of Caucasians with Hispanic names and hundreds of minorities with traditionally Caucasian surnames. It's all just an attempt for the federal government to medal where they don't belong, attempting to buy the votes of ethnic consumers. Dirty money, dirty politics.
        clquake
        • 11 Months Ago
        @Joe
        How can we take you seriously? Your job as a sales manager and finance manager is to quite literally screw everyone out of as much money as possible. I've even had one tell me the MSRP was a special price for special people like me. I didn't get a straight answer out of him when I asked wtf special meant. I however did find out from a client of mine that he had offered a much lower rate to him than what I was offered, and I know my financial situation was better than his.
      jasonbooboo
      • 11 Months Ago
      So people that viewed as a group (the point of this lawsuit) have the lowest credit scores and live in higher risk neighborhoods were charged higher interest rates? Higher risk, higher interest rate. I'm not understanding the outrage. If you want to get mad at someone as a black man, get mad at all the other black men that aren't making payments on time and making the group as a whole look bad. Stereotypes like Asian kids being good at math or Irish guys drinking a lot aren't true for everyone, but they are stereotypes for a reason because more often than not they are true for a group as a whole.
        Willy
        • 11 Months Ago
        @jasonbooboo
        What if you're that salesman closing a deal on a black customer with a good credit score, but with all your stereotypical assumptions that he lives in a crime ridden neighborhood and possibly just default on his loan? Less inclined to help him get a good interest rate, perhaps? Boom. Mind blown. Your welcome.
        Carlos Oliveros
        • 11 Months Ago
        @jasonbooboo
        I am pretty sure that the problem here is that all things equal (income, zip code, etc.), they seem to have evidence that people of some ethnicities (based on their name) were charged higher interest rates, which is discriminatory.
      jimathyrawlings
      • 11 Months Ago
      Lots of idiots in here who apparently did not read the whole article. Last time I checked, poor people in bad neighborhoods can't afford new cars. These ethnic people who were discriminated against lived in the suburbs along with their white counterparts who paid less. Discrimination? Yes.
        clquake
        • 11 Months Ago
        @jimathyrawlings
        A lot of people here, for whatever reason, are pro big business. Then they bring politics into it, as if their Congressional rep cares who they are, and they back it up with "facts" only known to them, but apparently is fiction in the real world.
        AngeloD
        • 11 Months Ago
        @jimathyrawlings
        @jimathyrawlings: You'e the one who hasn't read the article apparently. There was no clear evidence that many of these people were even minorities. The DoJ used surnames to guess at that "minor" fact. "... the CFPB had to employ a social science technique that uses statistical analysis of surnames to determine race..." The race hustle shakedown boogie...
          clquake
          • 11 Months Ago
          @AngeloD
          WTH are you talking about? Ally has teams of lawyers going through the same paperwork as the DOJ, and when they say settle, there's evidence. I audit a lot of banks, and I can tell you they don't back down like a scared mouse if there's no evidence.
          tump
          • 11 Months Ago
          @AngeloD
          Yes, most people named Wong are Asian. That's not a bad way to guess if it's all you have to go on. You fail to defend WHY that they were using that methodology AT ALL since there's no business need to do so, but we see which side of the bread you're buttered on.
        M5_4_life
        • 11 Months Ago
        @jimathyrawlings
        Ding, ding, ding, finally someone who read the article and understood it too!
      Metal Gods
      • 11 Months Ago
      This is Eric Holders DOJ using tax dollars to conduct expensive investigations in the name of "social justice". As another user already posted...credit and credit scores are not as simple as the numbers on the page. If the DOJ wants to champion a cause, they WILL find what they are looking for...why else would this iteration of the DOJ hire so many civil rights attorneys?
      Black Dyanmite
      • 11 Months Ago
      Institutional racist business practices by big American corporations, who stroke a check to get away with it? The hell you say! BD
        AngeloD
        • 11 Months Ago
        @Black Dyanmite
        @Black Dyanmite: Not a shred of evidence that there was any discrimination in this case. Just more fraudulent garbage spewed out by the race hustlers in the Obama Admin. Are Al Sharpton and Jesse Jackson getting a cut of the grift this time around?
          Seal Rchin
          • 11 Months Ago
          @AngeloD
          Uhhhh did they get the cut in Coca Cola shakedown? Actually they did, sorry about that.
        Seal Rchin
        • 11 Months Ago
        @Black Dyanmite
        Really? Is that why DOJ just charged a white guy with a hate crime connected to knockout game.................but never charged anyone before related to this crime. I suggest you read more about attacks and victims.
          clquake
          • 11 Months Ago
          @Seal Rchin
          You do know that this dim lightbulb made videos of himself using racial slurs and actually planning the attack, wondering if attacking a black person would make national headlines. http://www.latimes.com/nation/nationnow/la-na-nn-texas-hate-crime-knockout-game-20131226,0,3766504.story
          clquake
          • 11 Months Ago
          @Seal Rchin
          The DOJ isn't a business, but thanks for playing.
      Willy
      • 11 Months Ago
      Don't know the exact methods done to get their results by matching credit profiles and surnames, but probably certain they factored all possible variables (work/credit history, area they leave, age, gender, marital status, etc) to get to this conclusion. They may be an underlying factor in which we're more biased/racist than we think we are. I'm guilty of it too, it's something we don't admit to ourselves because we think we're better than "real" racist people. Bafflingly, even a neo-nazi won't say he's racist. Humans are fickle in nature. Besides, I'm sure ally bank can recoup the $80 mil loss in one hour. They'll be okay, guys.
        AngeloD
        • 11 Months Ago
        @Willy
        @Willy: No, Eric Holder has publicly proclaimed his anti-white racist views. He's an open National Socialist (Nazi) not a hidden one. He has openly declared that the Civil Rights Act, hate crimes laws, etc. do not apply to white people. They are only there to protect minorities according to Holder. Look at how he has refused to bring charges against the Black Panther Party members for voter intimidation after the video of them threatening white voters in Philadelphia surfaced a few years back. There are many other examples of his refusal to provide the equal protection of the laws to whites as mandated by the 14th Amendment. Obama and Holder are racist pieces of filth.
          Willy
          • 11 Months Ago
          @AngeloD
          It's only fair us brown people rise up and enslave all these white people.... Muah, ha ha ha! Sike, if you think I'm actually saying for real. But when did Obama or our general attorney (and how can he be a neo-nazi when he's black or mixed?) made statements discrimination on white isn't discrimination? Fox News be all over that! Apparently, you can get some sweet deals on your next auto loan if you have an Anglo-sounding name at least. Also true in gaining employment with the same qualifications too.
          clquake
          • 11 Months Ago
          @AngeloD
          You don't know what a Nazi is. Exactly zero of your post holds any truth. You should really stop posting.
        Metal Gods
        • 11 Months Ago
        @Willy
        Newsflash: human beings are biased and "racist". But is bank underwriting software racist? Or, is it more likely that software and the drones in the underwriting department assess interest rates based upon RISK and credit history or race? No one here cares about Ally Bank or DoJ. It is the blatant agenda of this givernment.
          d.hollywood
          • 11 Months Ago
          @Metal Gods
          Uh,Metals Gods...lending software does'nt write itself.(yet) It's written by humans with biases and agendas.That and / or it's written by humans who are paid to code according to the customers' wishes & biases. The "free market" economy has always been rigged to the detriment of dark-skinned "others" in our great nation.Think maybe that has come into play here?
          Willy
          • 11 Months Ago
          @Metal Gods
          Who closes the deal on the car sale? HAL 9000 or a human being? It was that end that drew attention to why minorities interest rates are higher than their white counterparts w the same credit profile. But the DOJ couldn't go after the dealership themselves, therefore they went to ally and change their practices in the future. Their blatant agenda on is social equality. The injustice! And yes shouldn't a government give(-rnment) back to society in which we're living?
          clquake
          • 11 Months Ago
          @Metal Gods
          The software isn't racist, nor is it biased, nor is it rigged. Actual live auditors, like me, go through the software to make sure it isn't. It however is dependent on the user, and in this case, users who routinely charged minorities more because they felt they could.
      Seal Rchin
      • 11 Months Ago
      So 5 lawyers got $90M and everyone else got to split the $8M? Cool, justice in America.
      Levine Levine
      • 11 Months Ago
      Notice NADA (National Auto Dealer Association) is once again involved in a slimy sleazy scheme to scam the unsuspecting consumers. NADA is the organization that opposed Tesla setting up show room that does not sell cars in various states. NADA is the biggest threat and theft of consumer rights protection.
      NY EVO X MR GUY
      • 11 Months Ago
      The more things change, the more things stay the same. I just call it greed.
        Sir Duke
        • 11 Months Ago
        @NY EVO X MR GUY
        Not sure who this was targeted at. They laws governing class action lawsuits need to be revised, drastically.
      Stormy22
      • 11 Months Ago
      Ally Financials unhappy Customers : https://www.facebook.com/pages/Ally-Financials-Unhappy-Customers/367933486670751
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