Editorial Contribution by Sally Writes
Decades worth of financial data have proven that there is widespread racial discrimination in the auto loan industry. Before 2013, loan approval rates were 1.3 percentage points lower for Black and Hispanic borrowers than lenders of other ethnic backgrounds. Minority lenders were also paying higher interest rates on average – 43% of African-Americans were charged a mark-up. The practice of racial discrimination was widespread amongst banks and financial institutions. In 2013 however, things changed.
A change for the better
After being presented with eye-opening data concerning institutionalized racial discrimination, in 2013, the Consumer Financial Protection Bureau (CFPB) put out a notice that any discriminatory action within the auto lending industry had been made illegal. This gave customers a level playing field when it came to purchasing vehicles, no matter the color of their skin or their ethnic background. If you walked into a dealership to look at trucks known for fuel economy and good driving range, you could easily compare prices and get a good deal. The cost of that truck would be the same for everyone.
The CFPB argued that the Equal Opportunity Credit Act applied not just to mainstream banks and lenders, but also to the auto industry. This prohibits lending based on an individual’s race, age, sex or religion. The CFPB’s notice led to Ally Bank paying out $80 million in damages to African-American, Asian, Hispanic and Pacific Island borrowers. Sadly, in 2018, the notice passed by the CFPB came crumbling to the ground. Congress eased the rules against racial discrimination; this was voted in by The House and The Senate, before finally being signed off by Donald Trump.
Almost immediately after the rules against discrimination in the loan industry were eased, many financial bureaus immediately returned to allowing mark-ups on interest rates. In terms of progress for African-Americans and people of minority backgrounds, this has been an enormous step backwards. Racial discrimination within the auto loan industry has been on the rise since 2018. If you’re looking to buy a new vehicle on finance, then it is advisable to visit a reputable credit union or bank and get approved for a loan before you even step foot in a car dealership. You should also study your contract carefully, and don’t ever be afraid to ask questions.
Racial discrimination on auto loans is widespread across America. Sadly the 14th Amendment simply doesn’t apply if you want to buy a truck.
Photo courtesy Fortune Vieyra