From the NYT:
Prosecutors Scrutinize Minority Borrowers‘ Auto Loans By MICHAEL CORKERY and JESSICA SILVER-GREENBERG MARCH 30, 2015That reminds me. What exactly is the ACLU up to these days? You used to hear about it all the time, but now it seems to maintain a much lower profile. It seems to now be on the side of government, as Ms. Gupta’s career path suggests.
Minority borrowers were once starved for credit through redlining — banks’ refusal to provide mortgages in their communities.
Now the booming auto industry has turned that historic wrong on its head, government authorities say, singling out minority borrowers and extending them the costliest car loans, a development that threatens to exacerbate the economic distress in some black and Hispanic neighborhoods.
The practice, known as reverse-redlining, is presenting new challenges for government authorities trying to shield the most vulnerable Americans from predatory lending. Prosecutors from the Justice Department and top officials with the Consumer Financial Protection Bureau are grappling with how to root out the practice in a fractured industry, where some of the least regulated players, the auto dealers, wield the most power and where virtually no national data exists to quantify the problem.
“In every facet of the auto lending market, combating discrimination is a top priority for the Civil Rights Division,” Vanita Gupta, acting assistant attorney general for the division, said in an interview. Ms. Gupta joined the Justice Department in October from the American Civil Liberties Union, where she was deputy legal director and headed its Center for Justice.
The latest push against auto dealers comes as previous efforts aimed solely at lenders have faced challenges, including intense resistance from the industry. One prominent action taken by the federal authorities against a large lender, Ally Financial, has been fraught with complications.So, it’s illegal to trick an innumerate illegal alien into an exploitive loan, but it’s okay to trick an innumerate white American citizen into the same loan? Perhaps we should experiment instead with this crazy idea called the equal protection of the law?
More than a year ago, Ally agreed to pay $80 million to auto buyers as part of a broader settlement over accusations that it charged minority customers higher interest rates. But none of that money has been paid out, according to several people briefed on the settlement.
One reason for the delay, the people said, is that federal authorities have found it complicated to determine which Ally customers are minorities who might have suffered harm. Before sending out the checks, the regulators wanted to make sure that none were sent to white borrowers, the people said. Another wrinkle is that information about the settlement is being sent in six languages.
… Neither auto dealers nor lenders are required to collect information about a borrower’s race or ethnicity. The mortgage market is different. After the redlining scandals in housing, Congress in 1975 passed the Home Mortgage Disclosure Act, which required lenders to detail their mortgage lending by race, ethnicity and ZIP code.Tino pointed out the giant federal online database of mortgages by race/ethnicity to me in 2008, which demonstrated that the Housing Bubble / Bust was intimately tied to massive expansion in lending to Hispanics.
Faced with a dearth of data in auto lending, the government authorities created a method that analyzes borrowers’ surnames and addresses to determine their race.That’s like what race/history/evolution notes does with the Forbes 400.
… Using proxies in their auto lending investigation into Ally, the federal authorities calculated that roughly 235,000 minority borrowers paid higher interest rates than white ones from April 2011 to December 2013. …Logically, Eric Holder’s Justice Department is arguing that car dealers are charging white customers less out of the goodness of their hearts, because, after all, car dealers are famously nice and unmaterialistic.
Part of the problem in the eyes of the federal authorities, the people said, is “dealer markups,” in which dealers tack additional interest onto a borrower’s loan. The markups can be used, the people said, to charge minority borrowers higher rates than white ones with similar credit profiles.
… At some dealerships, the Justice Department is taking aim at discriminatory practices that go beyond markups.That reminds me that in both Chicago and Los Angeles, I’ve been discriminated against in Toyota dealerships. I’ve several times been ignored by salesmen who don’t want to deal with an intelligent-looking white guy who no doubt has looked up on the Internet what the dealer’s cost of the car is.
In February, the department resolved a case against two dealerships in Charlotte, N.C., for intentionally targeting African-American borrowers with unfair and predatory practices in the financing of used-car purchases.
To lure the borrowers, the department said, the dealerships were situated in overwhelmingly African-American neighborhoods.