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Ally may face fines on auto lending

11-Nov-2013

Ally may face fines on auto lending
·    David Shepardson
·    Detroit News Washington Bureau

 
Washington — Detroit-based Ally Financial Inc. announced Tuesday that the federal consumer finance watchdog says the auto lender may have failed to abide by anti-discrimination laws, including ensuring that dealers who use Ally financing don’t overcharge minorities and women.
The Consumer Financial Protection Bureau has been investigating credit practices in the automotive finance industry and whether dealers and lenders treat prospective buyers fairly.
“In connection with these investigations, the staff of the CFPB has recently advised us that they believe we have an obligation to prevent independent automotive dealers with which we do business from engaging in certain retail financing practices that the CFPB staff believes violate the anti-discrimination provisions of the Equal Credit Opportunity Act, and that we have failed to fulfill this obligation. We understand that the CFPB has similarly advised other automobile finance companies,” Ally said in a securities filing on Tuesday.
Ally, the bank holding company that is 74 percent owned by the U.S. Treasury as part of $17.2 billion in bailouts, said it is in talks with CFPB. “It is possible that this could result in material adverse consequences including, without limitation, settlements, fines, penalties, adverse regulatory actions, changes in our business practices, or other actions,” the company said.
On Tuesday, Ally — formerly General Motors Co.’s in-house lending arm known as GMAC — reported net income of $91 million for the third quarter, compared to a net loss of $927 million in the prior quarter and net income of $384 million for the third quarter of 2012.
“This past quarter demonstrated continued strong performance in Ally’s dealer financial services operations and steady deposit growth from Ally Bank,” said Ally CEO Michael Carpenter.

Last week, 22 U.S. senators — 11 Democrats and 11 Republicans — asked the Consumer Financial Protection Bureau for more answers about its guidance to auto lenders.
In March, the bureau issued fair lending guidance “widely interpreted as pressuring lenders to eliminate or severely limit an auto dealer’s discretion to negotiate competitive financing for their customers,” said the letter Wednesday from Sens. Rob Portman, R-Ohio; Jeanne Shaheen, D-N.H., and 20 others. Neither Michigan senator signed the letter.
The bureau has been investigating major auto lenders and whether minority buyers are subject to higher interest rates than white buyers.
Dealers routinely arrange financing for customers. They are often allowed by lenders to mark up the interest rate charged to consumers, allowing them to keep the difference. The CFPB wants to make sure dealers aren’t charging minority buyers a higher rate than white buyers. In March, the CFPB issued guidance urging banks to avoid discriminatory practices.

From The Detroit News.

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