WASHINGTON The Consumer Financial Protection Bureau said today it will be monitoring for discriminatory practices in auto lending, especially the practice known as “dealer markup,” which allows lenders and dealers to share in secret interest rate hikes.
The CFPB is recommending that indirect auto lenders take steps to ensure that they are operating in compliance with the Equal Credit Opportunity Act and other fair lending laws as applied to dealer markup and compensation policies.
“Consumers should not have to pay more for a car loan simply based on their race,” said CFPB Director Richard Cordray, referring to recent research indicating that markup practices may lead to African Americans and Hispanics being charged higher markups than white buyers.
Cordray called on auto lenders to: set controls on dealer markup, or otherwise revising dealer markup policies; monitor the effects of markup policies as part of a fair lending compliance program; and eliminate dealer discretion to markup buy rates by compensating dealers a different way, such as flat fees per transaction.
