Toyota Credit, the financing division of the automotive company, will pay a settlement of $21.9 million to Black and Asian buyers who were charged more than white customers for their car loans.
The Los Angeles Times reported that Toyota Motor Credit Corp. faced investigation from the United States Department of Justice and the consumer Financial Protection Bureau since 2013; this as part of a wider inquiry into practices in the automotive lending industry.
The federal agencies found that the Toyota dealerships discriminated against over 100,000 Black and Asian car buyers over the past four years. Tacking on a race-based penalty that was above and beyond the base rate buyers were suppose to receive based on their credit score.
On average, Blacks paid 0.27 percentage points more than whites with similar credit records. Asians paid 0.18 percentage points more. This means Black borrowers paid as much as $200 more and Asians paid an average of $100 more than whites with the same credit profile. Although a dealership markup is not considered bad practice, it is a problem when the markups are based on race.
“No consumer should be forced to pay more money for a loan because of their race or national origin,” said U.S. Atty. Eileen M. Decker of the Central District of California regarding the settlement agreement.
Toyota Motor Credit made a statement saying the corporation “does not tolerate discrimination of any kind, even perceived or unintentional, from its employees or business partners. This practice extends to fair lending practices.”
In addition to the over $20 million Toyota was ordered to pay, the company will also allocate $2 million to compensate new customers until the issue is resolved. Toyota will also cap it’s dealer markup rates, which were as high as 2.5 percentage points, to 1.25 points, with 1 point for car notes over five years.
Toyota is not the only corporation that has been charged with a discrimination suit. In 2013, Ally Financial — formerly known as GMAC — was fined $18 million by the DOJ and CFPB and subsequently settled by agreeing to create an $80 million restitution fund, amid allegations of auto loan discrimination.
Just last year the Ohio-based Fifth Third Bank was ordered to pay $18 million in a settlement that charged the company with charging Black and Latino customers $200 or more for auto loans than whites. Auto dealers involved were allowed to keep the extra money earned from the interest as compensation.
Honda Financial — the financing division of Honda — also agreed to pay $24 million for it’s discriminatory practices last year.