On July 14, 2015, the Consumer Financial Protection Bureau (“CFPB”) and the U.S. Department of Justice (DOJ) announced a joint settlement of allegations that American Honda Finance Corporation (“Honda”), an indirect auto lender associated with the car manufacturer of the same name, violated the federal Equal Credit Opportunity Act by discriminating against African-American, Hispanic, and Asian and Pacific Islander borrowers in the pricing of auto loans. Notably, the terms of the CFPB’s consent order may indicate how indirect auto lenders in the future can avoid the most onerous financial penalties associated with allegedly unlawful pricing practices.
On March 21, 2013, the CFPB issued CFPB Bulletin 2013-02: Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act. In this bulletin, the CFPB describes its understanding of how the indirect auto lending industry works, and describes its view on how ECOA applies to indirect auto lending—including its theory on lender liability for disparities in dealer markups. The guidance offers advice to bank and nonbank indirect auto lenders within the CFPB’s jurisdiction on how they can limit their indirect auto fair lending risk. Read More