WASHINGTON – Ally Financial Inc. is paying $98 million to resolve U.S. government claims that it illegally charged minority borrowers higher rates on auto loans than whites with similar credit histories.
The agreement announced Friday by the Justice Department and the Consumer Financial Protection Bureau is the government’s biggest auto-loan discrimination settlement to date.
Ally is paying $80 million in damages to about 235,000 African-American, Hispanic and Asian and Pacific Islander borrowers, and $18 million in penalties.
Ally doesn’t make auto loans directly to consumers; it buys the loan contracts made by auto dealers. Ally sets an interest rate for the loans and allows dealers to charge customers a higher rate, or dealer markup.
Ally says it sets rates based only on borrowers’ credit and that it doesn’t practice or condone discrimination.