Filed Date: Dec. 20, 2013
Closed Date: Dec. 20, 2015
Clearinghouse coding complete
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)
Last updated Aug. 30, 2023, 1:27 p.m.
Docket sheet not available via the Clearinghouse.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):
Case Details
Causes of Action:
Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691
Available Documents:
Injunctive (or Injunctive-like) Relief
Outcome
Prevailing Party: Plaintiff
Nature of Relief:
Injunction / Injunctive-like Settlement
Source of Relief:
Form of Settlement:
Court Approved Settlement or Consent Decree
Content of Injunction:
Amount Defendant Pays: $98,000,000
Order Duration: 2013 - 2015
Issues
General/Misc.:
Discrimination Area:
Discrimination Basis:
National origin discrimination
Affected National Origin/Ethnicity(s):
Affected Race(s):