WASHINGTON Ally Financial (GKM) and Ally Bank will pay $98 million in fines and restitution to settle government claims that they discriminated against minorities through their indirect auto lending business.
The agreement announced Friday is the largest auto loan discrimination settlement with federal authorities in history. Under the agreement, the companies will pay $80 million back to consumers and an additional $18 million in penalties.
The Consumer Financial Protection Bureau and the Justice Department charged that Ally Financial and its subsidiary allowed mark-ups on interest rates at partnering dealerships that affected more than 235,000 minority borrowers from April 2011 up until this month.
"Discrimination is a serious issue across every consumer credit market," said CFPB Director Richard Cordray in a press release. "We are returning $80 million to hard-working consumers who paid more for their cars or trucks based on their race or national origin. We look forward to working closely with the Justice Department and Ally to make sure this serious issue will be addressed appropriately in the years ahead as well."
In addition to paying the fines, Ally is required to put in place a compliance program to prevent discrimination that includes performing a portfolio-wide analysis of pricing data for disparities at dealerships that can also be checked by the CFPB and Justice. Ally has been given the choice to continue paying affected borrowers until its program eliminates disparities or it can change its compensation structure so that it is non-discretionary.
"With this largest-ever settlement in an auto loan discrimination case, we are taking a firm stand against discrimination in a critical lending market," Attorney General Eric Holder said in the release. "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. It will enable the Justice Department and the CFPB to work closely with Ally and others to prevent discriminatory practices in the future. And it will reinforce our determination to respond aggressively to discrimination in America's lending markets - wherever it is found."