WASHINGTON - The Justice Department's fair-lending probe of the auto industry signals a new step in the government's drive to eliminate loan bias.

"It seems to mark a broadening of the lending enforcement action at Justice," said Richard Ritter, a former prosecutor who now consults on fair-lending issues. "It means they are going to commit resources to fight lending discrimination not only in the housing market, but in other markets."

Warren Traiger, a New York attorney, agreed. "There is now a serious application of the fair-lending laws to nonbank lenders. It is also continued evidence of increased and continued enforcement of the fair- lending laws."

Bankers should heed this warning that fair-lending compliance in home mortgage programs alone is not enough to avoid the government's spotlight, said Thomas Vartanian, a partner at Fried, Frank, Harris, Shriver & Jacobson.

"If you simply been focusing on mortgage lending, you may be missing the fact that there may be (other) problems," Mr. Vartanian said.

The investigation, first reported by the Detroit News, also shows that the Justice Department is committed to enforce fair-lending on a "cross- industry" and "cross-product" basis, Mr. Vartanian said.

Ford Motor Co. disclosed the probe in a Securities and Exchange Commission filing last week. General Motors Corp. and Chrysler Corp. then stepped forward and admitted they too were under investigation. None of the car makers has publicly discussed details.

Justice Department spokesman Myron Marlin declined to comment.

But, fair-lending experts said they believe the department is investigating whether car dealers, trying to secure the highest rates possible, routinely get minorities to pay more than whites.

If this is correct, the department may be in the process of building its first case based on disparate impact, the idea that business practices may adversely impact minorities, even if that was not their intent. To make a disparate impact case, the government must show that there was no business necessity for the policy.

The Justice Department has never formally used the disparate impact theory in bringing a case against a lender, preferring instead to prove that a policy directly discriminated against specific individuals.

Fair-lending experts cautioned too little is known about the case so far to conclude without doubt that the government is trying to build a disparate impact case.

Banking industry officials said it's about time the government broadened its enforcement program to nonbanks.

"The other lenders don't have examiners coming to review them periodically," said Karen Thomas, regulatory counsel for the Independent Bankers Association of America. "The only way Justice would find out about a violation would be with a complaint. So it only makes sense that Justice concentrates on the nonbank lenders."

Ms. Thomas noted that Assistant Attorney General Deval Patrick hinted at nonbank prosecutions at the IBAA's recent convention.

The change doesn't mean banks are now immune from fair-lending probes. "But it does level the playing field and that is something the industry wants," Mr. Traiger said.

Mr. Vartanian said the Justice Department intentionally side-stepped the banking industry for its first car-loan case. "They have gone to an industry that didn't expect attack and might not have been as vigilant and as well prepared," he said.

But, once the department establishes how the Equal Credit Opportunity Act applies to car loans, it can use it against banks, Mr. Vartanian said.

Karen Shaw, president of the industry consulting firm ISD/Shaw Inc., said political pressure from Republican lawmakers will not impede increased fair-lending enforcement.

"The push against discrimination has to get stronger if you want to end affirmative action and not look like a racist," she said.

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