Automaker Honda (HMC) discriminated against minority borrowers in the U.S. by charging them higher interest rates on car loans than whites regardless of their credit history, government regulators said Tuesday.
Thousands of African-American, Hispanic, and Asian and Pacific Islanders got stuck with higher rates, the Consumer Financial Protection Bureau and Department of Justice said in announcing a legal settlement with American Honda Finance Corporation (AHFC).
"Honda's financing practices that allowed dealerships to mark up individual loans resulted in illegal discrimination, with minority car buyers paying more for their loans than non-minority buyers with similar credit histories," said U.S. Attorney Eileen Decker of the Central District of California, in a statement.
The federal complaint alleges the average African-American victim was obligated to pay over $250 more during the term of the loan due to discrimination, the average Hispanic victim paid over $200 more and the average Asian/Pacific Islander paid over $150, according to the Department of Justice.
As part of the settlement, the nation's ninth-largest auto lender agreed to pay $24 million in restitution to those adversely impacted, along with limiting dealer markup to 125 basis points (1.25 percentage points) for loans of 60 months or less, and to 100 basis points (1 percentage point) for loans greater than 60 months.
The settlement, which is subject to court approval, will also have Honda paying $1 million to fund an educational program on auto finance designed to benefit minorities, the Justice Department said.
Honda took issue with the regulators' finding that it discriminated against minorities.
"AHFC has a difference of opinion with the CFPB and the DOJ regarding the methodology used to make determinations about lending practices, but we nonetheless share a fundamental agreement in the importance of fair lending," the company said in a statement.