Op-Ed

Car Dealers Charge Exorbitant Interest Rates

Published

9 years ago

July 20, 2015

By Charlene Crowell
NNPA Columnist

Car lending is on the rise, and rising with it is a hidden, unfair, abusive and discriminatory practice: car dealer interest rate markups. Surveys show that at least two-thirds of Americans have no idea it happens.

A decade ago, the largest auto finance companies settled landmark cases alleging discrimination in auto lending. Recent enforcement actions suggest that discrimination and unfairness still exist in the auto lending market.

Since 80 percent of the cars financed in the U.S. are financed through the dealer, this hidden practice is a huge threat to consumers.

Just this week, Honda Finance Corporation (HFC) agreed to pay $24 million in restitution to borrowers of color as a part of a settlement with the Consumer Financial Protection Bureau (CFPB) and Department of Justice (DOJ), after investigators discovered HFC’s policy to allow dealers to mark up the interest rate resulted in borrowers of color paying more in interest than White borrowers.

Unfortunately, Honda’s discriminatory auto practices are not an isolated incident.

An earlier settlement that CFPB and DOJ’ reached with Ally Bank, in which Ally agreed to pay $98 million in civil penalties and restitution, to settle claims of discrimination. Black, Latino and Asian American car buyers who financed with Ally paid more in interest on their loans than similarly situated White borrowers because of car dealer interest rate markups.

In September, CFPB revealed that several lenders agreed to pay more than $50 million in fines and restitution because supervisory examinations revealed issues of discrimination. And, a recent settlement between the DOJ and Evergreen Bank found similar disparities in Evergreen’s motorcycle lending portfolio, also attributable to dealer interest rate markups.

Consumer advocates welcomed the enforcement actions but cautioned that more work still needs to be done.

“We continue to believe that the only effective way to completely eliminate the discriminatory impact and the unfairness of hidden dealer interest rate markups is to end the practice altogether,” said Chris Kukla, CRL Senior Vice President. “This is a step in the right direction and we urge the CFPB and DOJ to continue pursuing the remaining cases.”

Kukla continued, “However dealer interest rate markups remain an unfair and hidden practice with continued potential for discrimination. CFPB and DOJ must vigilantly monitor the data for discriminatory or unfair impact and act swiftly if and when that impact occurs.”

For the moment, however, Richard Cordray, CFPB’s director will mark the progress made as the journey towards fair lending continues.

“Honda’s proactive decision to move to a new pricing and compensation system demonstrates industry leadership and represents a significant step towards protecting consumers from discrimination,” observed Cordray.

Dealer interest rate mark-up is the practice of adding extra interest to a consumer’s loan–dealers pocket this difference as compensation.

How does it work in practice?

A borrower qualifies for a loan at 5 percent, but the dealer raises it by as much as 2.5 percent more. The dealer tells the consumer, “Great news! We got you a great rate of 7.5 percent!” The dealer then collects a large bonus payment, up to a thousand dollars or more, when it sells the loan to a lender. The borrower gets stuck with higher car payments for the life of the loan.
Research, court cases and enforcement actions have shown that consumers of color have their loans marked-up more often, and by a greater amount, than White borrowers with similar credit profiles. Data from a series of court cases settled a decade ago found that African American and Latino borrowers were twice as likely to be hit with a dealer interest rate markup, and that markup was on average twice as large as for a similarly-situated white borrower. Those lenders agreed to cap the amount of markup dealers could add to the interest rate for 10 years, and those agreements have all expired.

Additional CRL research showed that for borrowers of color, following the auto dealers’ own advice on avoiding paying too much in markup does work. Car dealers insist that the interest rate is also negotiable, and that if consumers negotiate the rate like they do the price of the car the threat of overcharge disappears.

CRL data refutes that. According to a CRL-sponsored survey, borrowers of color reported attempting to negotiate the interest rate as much, if not more often, than white borrowers, and yet paid higher interest rates than similarly situated white borrowers. In fact, borrowers of color who negotiated the interest rate paid more than White borrower who did not negotiate.

Media accounts suggest that the CFPB and DOJ are working on several more cases alleging discrimination, and other bank regulators are also referring cases to the DOJ. A host of other enforcement agencies have also launched investigations into auto lending, including whether dealer markups have a discriminatory impact. A similar practice was banned in the mortgage market; it is long past time to end the same practice in the auto lending market.

Even though every forward stride deserves its own acknowledgement, the car lending market still lacks transparency and fairness for many consumers. Dealer interest rate markups are unfair and discriminatory, and we should not tolerate hidden fees that result in unfairness and discrimination in any financial marketplace.

Here’s hoping that car sales will soon be more broadly and fairly transacted for everyone.

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

###

Reporter II

Posts by Reporter II

Up Next

To Be Equal: Breaking New Ground in Ferguson, Mo.

Don't Miss

Beyond the Rhetoric: U.S. Export Bank Subsidizes Fortune 100

Reporter II

Click to comment

Commentary

Harris Dominates First Presidential Debate as Trump Struggles to Defend Record

NNPA NEWSWIRE — Vice President Kamala Harris positioned herself as a problem-solver, taking on issues like housing, childcare, and the economy. In her opening statement, she outlined her “opportunity economy” plan, which focuses on bolstering the middle class. “I was raised as a middle-class kid, and I am actually the only person on this stage who has a plan that is about lifting up the middle class and working people of America,” Harris said. She detailed a $6,000 child tax credit as part of her plan to support young families.

Published

2 days ago

October 2, 2024

Oakland Post

Former President Donald Trump and Vice President Kamala Harris during their first presidential debate Philadelphia on Tuesday night. Photo: Screen capture from ABC News feed of the debate.

By Stacy M. Brown, NNPA Newswire Senior National Correspondent

Vice President Kamala Harris decisively took control of the first presidential debate against former President Donald Trump in Philadelphia on Tuesday night, delivering a performance that put Trump on the defensive for much of the evening. Moderators David Muir and Linsey Davis of ABC News kept a tight handle on the debate, significantly improving from CNN’s June handling of Trump and President Joe Biden.

The debate began with a surprise as Harris approached Trump to shake his hand and introduced herself as “Kamala Harris,” an unusual move that set the tone for the night. Trump’s trademark scowl stayed in place throughout the debate, as Harris pressed him on his legal woes and diminished his record. Displaying her prosecutorial skills, Harris consistently turned the conversation toward Trump’s convictions, his business fraud case, and his role in the January 6 insurrection.

Harris positioned herself as a problem-solver, taking on issues like housing, childcare, and the economy. In her opening statement, she outlined her “opportunity economy” plan, which focuses on bolstering the middle class.

“I was raised as a middle-class kid, and I am actually the only person on this stage who has a plan that is about lifting up the middle class and working people of America,” Harris said. She detailed a $6,000 child tax credit as part of her plan to support young families.

Trump, by contrast, criticized the Biden-Harris economy, calling it “the worst period of time” he had seen. He defended his tariff policies and took aim at Harris, labeling her a “Marxist” while also accusing her of copying his economic policies. “I was going to send her a MAGA hat,” Trump quipped.

Abortion rights were another major focus of the night. Trump, when asked if he would veto a federal abortion ban, declined to answer directly, stating, “I won’t have to,” and arguing that the end of Roe v. Wade had satisfied everyone. Harris, in turn, vowed to restore Roe’s protections through federal legislation if elected.

“I pledge to you: when Congress passes a bill to put back in place the protections of Roe v. Wade as President of the United States, I will proudly sign it into law,” she said.

As the debate went on, Trump repeated several conspiracy theories, including a claim that migrants were eating pets in U.S. cities, which Muir quickly fact-checked. Trump doubled down, citing “people on television” as his source. Harris largely let Trump’s more outlandish statements pass, opting to stay on policy while allowing the moderators to address his factually inaccurate remarks.

In one of the most heated moments, Harris invited viewers to attend a Trump rally for themselves, commenting, “He talks about fictional characters like Hannibal Lecter and windmills causing cancer. You’ll notice people start leaving his rallies early—out of exhaustion and boredom.”

Trump, visibly irritated, retorted that he holds “the most incredible rallies in the history of politics,” but the debate soon returned to more substantive issues like crime and inflation.

The night clearly contrasted Biden’s earlier debate with Trump, as Harris managed to keep Trump on the defensive. Trump continued to fixate on conspiracy theories and past grievances, while Harris stayed focused on presenting her vision for the future.

With fewer than 60 days until the election, the debate sets the tone for what will likely be a hard-fought campaign. As the debate ended, Harris closed with a message to the American people: “This is about who we are as a country. The choice is clear—between chaos and leadership, fear and hope.”

Oakland Post

Posts by Oakland Post

Commentary

Opinion: In First Presidential Debate, Harris Exposes Trump’s Inadequacies

She’s still calling herself the underdog, but the biracial woman from Oakland, half Black and half Asian American, just changed the race for the presidency of the United States. If you ever doubted Kamala Harris’ ability to be our nation’s leader, everyone who watched Tuesday’s debate saw how fully capable she is of the job. She belongs in the White House.

Published

2 days ago

October 2, 2024

Oakland Post

Screenshot from Presidential Debate.

By Emil Guillermo

She’s still calling herself the underdog, but the biracial woman from Oakland, half Black and half Asian American, just changed the race for the presidency of the United States.

If you ever doubted Kamala Harris’ ability to be our nation’s leader, everyone who watched Tuesday’s debate saw how fully capable she is of the job.

She belongs in the White House.

Harris not only bested Donald Trump in arguing the facts; she showed how totally inadequate Trump is to again be our country’s Commander-in-Chief.

Harris deftly made her case on issue after issue, while baiting and manipulating Trump on the economy, on abortion, and on immigration.

Imagine how Putin and other world leaders play Trump. Harris exposed Trump for all to see. It wasn’t exactly an “emperor has no clothes” moment. It was more like “the twice impeached, convicted felon on 34 counts” has no business running for president. Trump is unfit mentally for the job, if not unfit morally.

It must have been a disappointment for deep MAGA to see their candidate so incapable of holding his own against Harris. At one point, she had him defending the crowd size at his rallies after she said people were leaving because he was boring.

And then instead of real policies that impact our lives, the former president spoke passionately about… his crowd size.

When that happened, I think everyone could see: Harris ate his lunch.

Going into the debate, the consensus in this tight race was that it was a virtual tie with Trump one point ahead.

But after their first meeting ever in a head-to-head-match up, CNN’s instant poll showed Harris winning the debate well beyond any margin of error, 63 percent to 37 percent.

There’s more distance between the two than previously understood. The debate exposed that.

TRUMP’S LIES

At the beginning of the week, I said the only way Trump could win the debate was if he “played nice.”

But the bully just couldn’t do it.

Acting presidential was just one lie Trump couldn’t pull off in another debate night mired in Trump lies.

Did his administration really do “a phenomenal job in the pandemic” when over a million Americans are dead? Is Kamala Harris “a Marxist and everybody knows it”? And what about those cat-eating immigrants in Springfield, Ohio, where every local official confirmed to news organizations that the story was false. There was even a lie on that Trump lie, when the former president said the immigrants were eating cats AND dogs. No, it’s just one lie. Just cats is enough.

And all that was just a fraction of the lies Trump told in the 90-minute debate.

Still, even with all that, I wouldn’t say Kamala Harris “whooped” Donald Trump.

It was more like general domination.

In fact, she had him at “Kamala Harris.”

When Trump seemed to dismiss the possibility of an opening handshake, Harris forced the issue. She walked toward Trump’s podium, reached out her hand, and introduced herself by name.

That gesture put Trump on the defensive all night.

About the Author

Emil Guillermo is a journalist and commentator. See his micro talkshow on YouTube.com/@emilamok1

Oakland Post

Posts by Oakland Post

Activism

Access Better Health with Medically Tailored Meals – Transforming Health Through Nutrition for Medi-Cal Patients

Medically Tailored Meals are one of 14 new services offered through Medi-Cal that provide members with access to new and improved services to get well-rounded care that goes beyond the doctor’s office or hospital.

Published

2 weeks ago

September 19, 2024

Oakland Post

Stock Photo

Advertorial

Launched in 2018, the Medically Tailored Meals pilot program was designed to help Medi-Cal patients with congestive heart failure by reducing hospital readmissions and emergency department visits by providing tailored meals meeting specific dietary needs.

The program’s success in improving health outcomes and reducing costly emergency room visits encouraged the Department of Health Care Services (DHCS) to expand the Medically Tailored Meals program to all 58 counties through Medi-Cal transformation and a new set of services called Community Supports.

Medically Tailored Meals: Overview

Malnutrition and poor nutrition can lead to severe health outcomes, especially among Medi-Cal patients with chronic health conditions. Medically Tailored Meals aim to improve health outcomes, reduce hospital readmissions, and enhance patient satisfaction by providing essential nutrition.

Key Features:

Post-Discharge Delivery: Meals are delivered to patients’ homes immediately following discharge from a hospital or nursing home.
Customized Nutrition: Meals are tailored to meet the dietary needs of those with chronic diseases, designed by registered dietitians (RD) or certified nutrition professionals based on evidence-based guidelines.
Comprehensive Services: Includes medically tailored groceries, healthy food vouchers, and food pharmacies.
Educational Support: Behavioral, cooking, and nutrition education is included when paired with direct food assistance.

Key Benefits:

Address Food Insecurity: Mitigates poor health outcomes linked to food insecurity.
Support Complex Care Needs: Tailored to individuals with chronic conditions.
Improve Health Outcomes: Studies show improvements in diabetes control, fall prevention, and medication adherence.

Patient Testimonial:

“My diabetes has gotten better with the meals. I’ve kept my weight down, and I feel much better now than I have in a long time. I’m one of the people this program is meant for.” — Brett

Eligibility:

Eligible Populations: Eligible Medi-Cal members include those with chronic conditions like diabetes, cardiovascular disorders, congestive heart failure, stroke, chronic lung disorders, HIV, cancer, gestational diabetes, and chronic mental or behavioral health disorders. Also, those being discharged from a hospital or skilled nursing facility or at high risk of hospitalization or nursing facility placement are also eligible.

Service Limitations: Up to two meals per day for up to 12 weeks, extendable if medically necessary. Meals eligible for reimbursement by alternate programs are not covered.

Cost Savings and Improved Health Outcomes:

Health Outcomes: Research indicates a 22% to 58% decrease in emergency department visits and a 27% to 63% decrease in inpatient admissions among Medically Tailored Meals recipients, translating to significant health care cost savings.

Project Open Hand: A Success Story

Project Open Hand has been a leader in providing Medically Tailored Meals, significantly impacting the lives of Bay Area Medi-Cal patients with chronic illnesses. Since its inception, Project Open Hand has delivered nutritious meals to individuals with diabetes, HIV, and other serious health conditions, demonstrating remarkable health improvements and cost savings.

Key Achievements:

Improved Health Outcomes: Project Open Hand’s research found a 50% increase in medication adherence among recipients of Medically Tailored Meals.
Reduced Hospitalizations: Their program showed a 63% reduction in hospitalizations for patients with diabetes and HIV.
Enhanced Quality of Life: Patients reported better health and increased energy levels.

Project Open Hand ensures that each meal is prepared using fresh, wholesome ingredients tailored to meet the specific dietary needs of its clients. By partnering with Medi-Cal managed care plans, Project Open Hand continues to provide life-saving nutrition to those who need it most.

Join Us in Our Mission

You can experience the profound impact of Medically Tailored Meals by joining the Medi-Cal Community Supports services initiative. Your involvement can make a difference in promoting your health through nutrition.

Learn More

For more information about Medically Tailored Meals and how to get involved, call the state’s Medi-Cal Health Care options at 800-430-4263 or contact your local managed care plan.

In Alameda County, Medi-Cal recipients can contact:

Alameda Alliance for Health: 510-747-4567
Kaiser Permanente: 855-839-7613
In Contra Costa County, Medi-Cal recipients can contact:
* Contra Costa Health Plan: 877-661-6230
Kaiser Permanente: 855-839-7613

In Marin County, Medi-Cal recipients can contact:

Partnership Health Plan of California: 800-863-4155
* Kaiser Permanente: 855-839-7613

In Solano County, Medi-Cal recipients can contact:

* Partnership Health Plan of California: 800-863-4155
Kaiser Permanente: 855-839-7613

Your health and well-being are your health care provider’s top priority. Medically Tailored Meals are designed to enhance quality of life by advancing health care through the power of nutrition. Experience the benefits today and take the first step toward a healthier you.