Honda's US auto financing arm to pay $24 million for discriminatory lending - The US financing division of Honda has agreed to pay $24 million to resolve allegations that minority buyers were overcharged by the company with higher interest rates on vehicle loans.
For its part, American Honda Finance denied practicing discrimination but it agreed to offer $24 million in relief to thousands of African-American, Hispanic and Asian and Pacific Islanders who paid higher rates on their loans than white borrowers since January 2011, without regard to their credit records, the Department of Justice and Consumer Financial Protection Bureau said.
The company is the ninth's largest auto lender in the US. It also agreed to pay an additional $1 million to fund a consumer financial education program.
Federal officials said that an average African-American buyer of a Honda or Acura vehicle had to pay more than $250 extra during the term of a loan as the result of racial discrimination. They added that an average Hispanic buyer paid more than $200 extra, and Asian and Pacific Islanders paid more than $150 extra.
An administrator appointed under the settlement terms will be tasked with locating victims and distribute compensation at no cost to affected borrowers.
"Honda knew or had reason to know that its policy and practice of allowing dealers to mark up consumers' interest rates created a substantial risk of discrimination, according to a civil court complaint filed by federal prosecutors.
"We commend Honda for its leadership in agreeing to impose lower caps on discretionary markups and for its commitment to treating all of its customers fairly without regard to race or national origin," said Vanita Gupta, head of the Department of Justice's Civil Rights Division.
Other auto lenders "should take note of" the settlement, said CFPB Director Richard Cordray.
Honda also agreed to the consent order solely to avoid contested litigation with the Department of Justice and instead devote its resources "to providing fair and industry-leading services to its customers."