Government officials are examining the practices of a group of auto lenders for possible racial discrimination.
The U.S. Consumer Financial Protection Bureau and the Department of Justice are probing the group after "significant differences" were noted in interest rates on car loans paid by black, Hispanic and Asian borrowers compared with those paid by white customers, Bloomberg reported.
"We have a number of ongoing joint investigations in the indirect auto-lending space," Steven Rosenbaum, chief of the housing and civil enforcement section at the Justice Department.
The bureau told Ally Financial it failed to prevent auto dealers from violating the Equal Credit Opportunity Act, which is enforced jointly by the bureau and the Justice Department, Bloomberg reported.
Ally Financial and other lenders face possible lawsuits.
The agency's work has indicated a "significant risk of discriminatory pricing outcomes," said Patrice Ficklin, the bureau's assistant director for fair lending.
The disparities have been substantial, officials said.
"What we've already seen amounts to tens of millions of dollars in overpayment," Ficklin said, and "the total could be much greater than that."
The bureau is working to guide a practice it calls "dealer mark-up" and auto dealers call "dealer-assisted financing." Banks work as indirect lenders, while dealers are allowed to add points to the interest rate and keep the difference.
Supervising banks with assets of more than $10 billion, the consumer bureau said banks can face lawsuits if they purchase discriminatory loans from dealers. The bureau began the investigation of auto loan discrimination in March.
"Numerous institutions" have disparities not explained by differences in credit quality of more than 10 basis points, while others reach 20 or 30 basis points, according to the AP.
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