Maryland Consumer Attorney: Honda Fined for Overcharging Minorities
Time and time again, lenders of all stripes have being caught taking advantage of minorities for profit. This time it is in the auto industry. According to a Washington Post article, Honda has agreed to pay $24 Million to minority borrower.
The investigation and settlement was reached by the Department of Justice (DOJ) and announced on July 14, 2015. Honda had allegedly authorized car dealers to markup interest rates by 2.25 percent according to he government. Honda says that from now on mark-ups will be limited to 1.25 percent if the loan is for five years or less. The discriminatory application of this markup resulted in minorities paying between $150 and $250 more than whites.
Honda will bear the cost of identifying borrowers affected and getting the settlement funds to them. Therefore, if you have a loan from American Honda Finance you should pay attention to the Department of Justice and Consumer Financial Protection announcements on this issue.
Unfortunately, this is probably just scratching the surface of what could be a pervasive problem around the country. While lenders like Honda do not lend directly, the culture they promote among car dealership can lead to abuses and discriminatory conduct in pursuit of profits. Dealers get paid part or all of the markup in interest rate they obtain from the borrower. Hence, unsupervised and unruly sales persons can engage in discriminatory conduct while staying within the markup guidelines.
Therefore, by holding lenders such as Honda responsible, DOJ is forcing these entities to supervise more of the people it relies on to generate its profits. No more can lenders say that we did not negotiate the terms while turning a blind eye to potential abuses. This is a good development especially for those on the margins of society without the sophistication or resources to fight back from those who prey on them.
To learn more about dealer markup check out our article about the Consumer Financial Protection Bureau’s bulletin issue earliest this year.