Auto Lending News
Barberton Junk Cars is back with our latest blog posting in auto-related discussions such as auto junk stories and the value of a scrap car. BJC is a ‘where to scrap my car’ outfit servicing the counties of Summit, Portage and Medina. Among those of who scraps cars and process auto junk, we strive to add an additional dimension by providing interesting and current dialogue. So remember, when asking yourself where to scrap my car, look no further than Barberton Junk Cars. Our next topic involves auto dealer discrimination against customers who choose to finance through the dealership’s partner banks. The finance departments in the retail auto industry are given “base interest rates” for borrowers in certain credit-based categories. They will add a markup to the rate of Staff is more likely to generate loans for the lenders who pay these incentives, commonly referred to as “splits”. On November 17, 2015 Stuart Rossman posted a story titled ‘The Data Is Clear: Auto Lenders Discriminate’ on usnews.com with the following details: “The House of Representatives will vote on reforming the Indirect Auto Financing Guidance Act, which would weaken the ability of the CFPB to address discrimination in auto financing. That would be a mistake. The CFPB and Dept. of Justice both concluded that auto financers’ policy of giving dealers discretion to mark up the interest rates in financing results in discrimination vs minority borrowers. Ally Bank, American Honda Finance & Fifth Third all are believed to be lenders where borrowers of color paid higher than whites with similar creditworthiness. The CFPB urged all auto financers to move to a method that does not result in discrimination.
The findings of discrimination were based on proxy analysis. Loan files don’t list the race of borrowers, so the study was based on consumers’ last names & geographic location. This analysis conducted on data from finance transactions can find patterns that reveal differences based on race. A few years ago, the National Consumer Law Center proved the same conclusion based on data that did reveal the race of borrowers. In the 1990s, class action lawsuits against major auto financiers challenged the use of dealer markups. In discovery, data on loans were matched to drivers’ license data indicating race. The results were overwhelming: African-Americans were twice as likely to have markups — comparable to white borrowers. When African-American and comparable white borrowers both were marked up, the African-American borrowers paid significantly more. Hispanic origin was not coded on enough loans to analyze.
The evidence convinced courts that the plaintiffs had proved their case. The auto finance companies settled with compensation & agreed to limit discretionary auto dealer markups. The agreements all expired by 2012; under pressure from dealers who play one finance company off of another, they have nearly all returned to the same practices that led to our lawsuit. This isn’t to say that dealers charge higher rates to minorities intentionally, many subconscious factors go into the negotiation over a loan. Dealers may be subliminally letting race affect their calculation of how much money they can extract. Unlike home-mortgage borrowers, the race of car finance borrowers is not recorded. Race coding based on proxy is a reliable way to produce findings. Dealers deserve to be paid for efforts to originate loans, but we can find a better method.” The complete story is available here.
It seems that there are several questionable aspects to the opinions of Mr. Rossman in the aforementioned article:
- The findings are based on fundamentally flawed data. Since unable to verify the races of those who were issued the loans, they chose to base their finding on proxy data. They are guessing on the race of the loan recipients! Common sense would lead most rational observers to dismiss the validity of the findings.
- They claim that Hispanic origin would be more difficult to decipher using their incompetent method. The likelihood of uncovering those likely to be of Hispanic decent would likely be more reliable, based on the recipients last names.
- He states that the “plaintiffs” have proven their case. Another ridiculous lie, since the plaintiffs were not the minorities who were recipients of the loans, but rather some third party that stands to gain something from the “fantasy” findings.
- Mr. Rossman further embarrasses himself in his “fantasy” by suggesting that dealers may be subliminally and subconsciously executing these unjust and prejudicial rate-hiked loans. To make a case on something as fact and suggest that the actions are done subconsciously is profoundly erroneous.
- The lenders that initially settled in the case whose terms expired in five years simply agreed to pay the settlement and move on. They likely considered it much more cost effective and simple, compared to paying for litigation and generating negative publicity.
Sell us your car
You can scrap a car in Kent for the value of a scrap car and receive cash for your auto junk. Those wondering where to scrap my car in Green, Tallmadge or Mogadore should contact our junk car buyer today. If seeking someone who scraps cars in East Akron, Hudson or Firestone Park, simply call (330) 732-JUNK. Recently in the US, the value of a scrap car has declined quite a bit. The provider who scraps cars in your area is likely to give you a lower than usual offer to sell us your car. We are a solution when it comes to scrap car removal in the Chapel Hill area, Cuyahoga Falls and Copley. To sell a junk vehicle in Copley, North Akron or Ellet, the requirements are that you possess the title to the car and a matching ID.