Government officials said they have not accused Ally of deliberately discriminating against minority borrowers in its rate-setting. But whether the action is deliberate or not matters little to the borrowers who are discriminated against, they said.
Under the settlement, Ally will have to monitor dealers’ rate-setting to prevent further discrimination or eliminate the dealer markups. A compliance program to be established by Ally will include education of dealers about anti-discrimination laws and taking action against dealers when discrimination occurs.
“We are taking a firm stand against discrimination in a critical lending market,” Attorney General Eric Holder said in a statement. “By requiring Ally to provide refunds to those who are overcharged because of their race or national origin, this agreement will ensure relief for Americans who are victimized.”
The National Automobile Dealers Association said it fully supports the anti-discrimination laws but it criticized the approach taken by the regulators in the settlement with Ally.
“The CFPB continues to withhold the secret methodology it uses to determine whether unintentional discrimination has occurred,” the group said in a statement. “The public still does not know whether the (CFPB) takes into account legitimate factors that can affect finance rates — for example, a dealer’s ability, regardless of race, to lower the interest rate to meet a customer’s monthly budget.”
Ally, the former auto loan and mortgage arm of General Motors, received a $17.2 billion federal bailout at the height of the financial crisis, to save the company and keep auto loans flowing. Ally has repaid roughly $12 billion. The Treasury Department still holds a 64 percent stake in Ally, with the rest held by a mix of institutional investors.
GM said last week it has sold its 8.5 percent stake in Ally for about $900 million, expecting to record a gain of $500 million from the sale in its fourth-quarter earnings.