CFPB and DOJ Take Action Against Indirect Auto Lender for Discrimination
January 6, 2014
The Consumer Financial Protection Bureau’s (CFPB) first major enforcement action based on racial discrimination came against one of the largest auto finance lenders in the country. Ally Financial Inc., and its subsidiary Ally Bank, made automobile loans through a network of 12,000 dealers and had total assets of $182 billion. The CFPB and Department Of Justice’s joint consent order faulted the lender for failing to control the use of dealer markups in which dealers were given discretion to vary Ally’s minimum buy rates. Ally was not accused of discriminating intentionally, but rather that its compensation structure and failure to monitor dealers’ practices led to rate disparities by race and national origin. Ally was therefore liable under the “disparate impact” theory of liability. Among other things, Ally was required to pay $80 million into a settlement fund to compensate individuals hurt by its practices, plus $18 million into the CFPB’s Civil Penalty Fund.
See CBA’s Regulatory Compliance Bulletin for more information.