U.S. House Republicans Accuse CFPB of Bungling Auto Loan Settlement Payments (Jan. 27, 2016)
U.S. House Republicans have accused the CFPB of bungling payouts meant to settle claims of racial discrimination in auto lending. The Jan. 20 report, from Republican staff of the House Committee on Financial Services, claims the bureau failed to take into account the race of consumers when deciding how to distribute the $80 million settlement.
The latest report stems from a case in which the bureau charged that Ally Bank and auto finance company Ally Financial Inc.—which used to be GMAC Inc.—charged higher interest on auto loans to minorities, violating federal fair lending rules. The higher interest rates allegedly affected minority consumers, though Republican staff members had previously charged that the CFPB used a faulty statistical method to determine that minority consumers paid more interest on auto loans than did other shoppers.
Ally provided no immediate comment today on the new report. A spokesman for the bureau says it is reviewing the report. “The CFPB’s goal has been, and continues to be, the elimination of illegal discrimination,” he says. “Discrimination in auto lending has resulted in minority borrowers being unfairly charged higher interest rates on their loans. We will continue to fairly and consistently enforce the Equal Credit Opportunity Act to ensure borrowers harmed by discrimination receive the relief they deserve.”
The auto lending case reportedly represents the first time the bureau has become involved in the auto lending process. In general, conservative House members have tried to weaken the power of the bureau since its creation by the 2010 Dodd-Frank Act.
The new report says the bureau, in deciding how to distribute the Ally settlement to some 235,000 consumers, removed a “number of safeguards” from that decision process to distribute as many checks as possible. That led to the bureau not confirming the race of any claimants, the report says, with settlement checks likely to go to some white borrowers. “That’s an unorthodox approach to fair lending enforcement, to say the least,” the report says. According to the report, the motivation was this: If the bureau was seen as distributing too few checks, its original methodology and credibility would be called into question.
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