WASHINGTON Justice Department intervention in a Tennessee case against an automobile lender has banks worried that they could become legally liable when they buy or fund loans from third parties engaged in discriminatory lending.
The Justice Department filed a friend-of-the-court brief in a case in which African-American plaintiffs are charging that Nissan Motor Acceptance Corp. should be held responsible for allegedly discriminatory loans made by a Nissan dealer.
In the brief, acting U.S. Assistant Attorney General Bill Lann Lee argued that even when loans are made by a third party, lenders are liable under the Equal Credit Opportunity Act, Sundays New York Times reported.
What the Justice Department is trying to do is make lenders, including bank lenders, responsible for pricing decisions by auto dealers, said Andrew Sandler, a partner at Skadden, Arps, Slate, Meagher & Flom law firm here. Rather than enforcing the law directly against auto dealers, the Justice Department is trying to make it the banks responsibility .
Many in the banking industry see the Justice Department intervention in this case, which is being heard in the U.S. District Court for Middle Tennessee in Nashville, as part of a trend to deputize banks.
If the Justice Department is successful at furthering the proposition that banks are responsible for the conduct of any intermediaries they do business with, this will place very significant additional compliance burdens on financial institutions, Mr. Sandler said.
The Justice Department is expected to intervene in a similar case against General Motors Acceptance Corp.