Honda’s auto loan practices came under scrutiny a couple of years ago and now the company is shelling out millions towards a race discrimination lawsuit.
Honda is now paying $24,000,000 because it knowingly charged Black and Hispanic loan customers higher interest rates on loans. According to an investigation, Black and Hispanic customers routinely paid $250 or more for their loans than white customers, even if they had better credit.
The US Consumer Financial Protection Bureau and Department of Justice said that American Honda Finance Corp, the company’s loans arm, would change its pricing and compensation system to reduce the potential for discrimination.
Despite the settlement, Honda said 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 (AHFC) 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.
The $24m that Honda will pay will go in to a fund to compensate affected borrowers.
“Discrimination of any kind is intolerable,” said Eileen Decker, the U.S. Attorney for the Central District of California, where the Honda lending unit is based. “Other auto companies should follow Honda’s lead in taking steps to ensure that their sale and financing practices do not result in discrimination.”