According to reports a U.S. auto finance arm of Honda will pay $24 million in restitution over allegations that its loan pricing practices caused minority customers to pay higher interest rates than white borrowers did, U.S. regulators said on Tuesday.
Auto giant fined $24 million over allegations that it overcharged minorities
Honda allegedly charged thousands of African-American, Hispanic and Asian/Pacific Island auto loan borrowers higher interest rates solely because of their race.
Sources say the U.S. Consumer Financial Protection Bureau and Department of Justice said American Honda Finance Corp also would change its pricing and compensation system to reduce the potential for discrimination. American Honda Finance Corporation said in a statement that it opposed discrimination.
In the statement, the company added that it disagreed with how the two regulators determined discrimination but "we nonetheless share a fundamental agreement in the importance of fair lending."
American Honda Finance Corporation does not make loans directly to consumers, but receives loan applications through car dealers. Those dealers have the discretion to vary a loan's interest rate after an initial price Honda sets based on creditworthiness, reports Business Insider.
According to the complaint, Honda charged thousands of African-American, Hispanic and Asian/Pacific Island auto loan borrowers higher interest rates solely because of their race.
The average African-American borrower paid about $250 more during the course of the loan, the regulators said, according to sources.
Reports reveal that as part of the agreement, the company has agreed to limit car dealers' interest rate markups on Honda loans to between 1 and 1.25 percentage points.
American Honda Finance Corporation will also pay $1 million into an auto finance education program for minority borrowers, the regulators said according to the report.
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