Commenter Stays72, reacting to my denunciation yesterday of the Consumer Finance Protection Bureau’s strong-arming of Ally Financial over its purported discriminatory auto-lending practices, writes this:
Tom left out this inconvenient fact of the case: Ally Financial allowed auto dealers, who meet face to face with the customer, to increase the interest rate charged to the customer, and then were allowed to keep a share of the markup. African Americans, Latinos and Asians were charged a higher interest rate at a much greater frequency than other (white) customers. Ally Financial didn’t have to know the ethnicity of the customer—they relied on the auto dealers to do that, and Ally gained financially from that arrangement.
Funny how Tom leaves out the key points that don’t support his premise. Funny, but not surprising, since this is a consistent pattern for him.
Nice cheap shot there at the end! As to the larger point, dealer markups on indirect auto loans are a common, accepted, and longstanding industry practice, and were even authorized in the CFPB’s agreements with Ally, Honda, Toyota, and other lenders. Such markups would indeed be objectionable if dealers used them as a way to discriminate against minority borrowers. But the whole reason why the CFPB-Ally deal is such a travesty is that there’s no evidence that Ally or dealers discriminated against anybody. The beginning and end of the CFPB’s case against Ally, remember, is that it relied on disparate impact of loan terms on minority borrowers: minority borrowers were generally turned down more often and charged higher rates than whites were. But as I noted yesterday, if you look beyond mere disparate impact and adjust the data for relevant factors such as credit score and loan size and term, any evidence of discrimination evaporates. Even the government seemed to understand that, if former Ally CEO Michael Carpenter is to be believed. But the government didn’t care. It wanted to score political points and make an example of Ally for the rest of the industry.
But the actual facts can’t change. Stays72 imagines some dark secret conspiracy between Ally and its dealers when he writes that “Ally Financial didn’t have to know the ethnicity of the customer—they relied on the auto dealers to do that.” I suppose he’s right, in a way. Ally and its dealers did collude—to ensure its customers were treated fairly and equally. That the company had to cough up $100 million for doing the right thing is shameful.
What do you think? Let me know!