Case: CFPB Investigation of Ally Financial Inc.

13-CFPB-00010 | No Court

Filed Date: Dec. 20, 2013

Closed Date: Dec. 20, 2015

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Case Summary

This case concerns racially discriminatory pricing. This action was brought by the Consumer Financial Protection Bureau (CFPB) in an administrative agency and by the Department of Justice (DOJ) in the U.S. District Court for the Eastern District of Michigan against the creditor Ally Financial Inc. (Ally). Under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Equal Credit Opportunity Act, the CFPB and DOJ are authorized to take action against creditors engaging in illegal d…

This case concerns racially discriminatory pricing. This action was brought by the Consumer Financial Protection Bureau (CFPB) in an administrative agency and by the Department of Justice (DOJ) in the U.S. District Court for the Eastern District of Michigan against the creditor Ally Financial Inc. (Ally). Under the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Equal Credit Opportunity Act, the CFPB and DOJ are authorized to take action against creditors engaging in illegal discrimination. 

After conducting an investigation that began in September of 2012, the CFPB concluded that more than 235,000 minority borrowers paid higher interest rates for auto loans between April 2011 and December 2013. As an indirect auto lender, Ally set interest rates that auto dealers could buy but allowed dealers to charge a higher interest rate (known as dealer markups) when the sale was finalized. Ally would then share some of the revenue from that higher interest rate with the dealer. The CFPB’s investigation concluded that Ally violated the Equal Credit Opportunity Act by charging Black, Latino, and Asian and Pacific Islander borrowers higher deal markups than similarly situated white borrowers. Under Ally’s structure, dealers were incentivized to mark up interest rates. The CFPB found that Ally failed to implement an effective compliance program to monitor dealer markups to prevent discriminatory pricing. 

Under the December 20, 2013, consent order issued by CFPB, Ally was ordered to pay $80 million in damages to harmed borrowers who had been affected by the discriminatory process. Ally was also required to either eliminate dealer markups or implement a compliance program to prevent similar discrimination in the future. Ally was given the option to move away from dealer markups, which would eliminate its obligation to monitor the fair lending risk created by ongoing dealer markups. Finally, Ally was ordered to pay $18 million into the CFPB’s Civil Penalty Fund.

The Consent Order was set to terminate ninety days after Ally conducted two years of portfolio-wide analysis for discrimination and provided the appropriate consumer renumeration. If after the first two years there were still statistically significant dealer markup disparities based on race or national origin, the consent order would require an additional year of monitoring. According to the CFPB, the consent order has been terminated.

Summary Authors

Claire Butler (12/30/2022)

Documents in the Clearinghouse

Document
1

13-CFPB-00010

Consent Order

Dec. 20, 2013

Dec. 20, 2013

Order/Opinion

Resources

Docket

Last updated Aug. 30, 2023, 1:27 p.m.

Docket sheet not available via the Clearinghouse.

Case Details

State / Territory: District of Columbia

Case Type(s):

Fair Housing/Lending/Insurance

Key Dates

Filing Date: Dec. 20, 2013

Closing Date: Dec. 20, 2015

Case Ongoing: No

Plaintiffs

Plaintiff Description:

This action was brought by the Consumer Financial Protection Bureau and the United States Department of Justice.

Plaintiff Type(s):

U.S. Dept of Justice plaintiff

Non-DOJ federal government plaintiff

Attorney Organizations:

U.S. Dept. of Justice Civil Rights Division

Public Interest Lawyer: Yes

Filed Pro Se: No

Class Action Sought: No

Class Action Outcome: Not sought

Defendants

Ally Financial Inc. (Michigan), Private Entity/Person

Defendant Type(s):

Bank or credit provider

Case Details

Causes of Action:

Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691

Available Documents:

Monetary Relief

Injunctive (or Injunctive-like) Relief

Non-settlement Outcome

Outcome

Prevailing Party: Plaintiff

Nature of Relief:

Injunction / Injunctive-like Settlement

Damages

Source of Relief:

Litigation

Form of Settlement:

Court Approved Settlement or Consent Decree

Content of Injunction:

Discrimination Prohibition

Amount Defendant Pays: $98,000,000

Order Duration: 2013 - 2015

Issues

General/Misc.:

Pattern or Practice

Predatory lending

Racial profiling

Discrimination Area:

Disparate Treatment

Lending

Discrimination Basis:

National origin discrimination

Race discrimination

Affected National Origin/Ethnicity(s):

Hispanic

Affected Race(s):

Asian/Pacific Islander

Black