The United States has settled a lawsuit alleging that an automobile dealership formerly doing business in Los Angeles violated the Equal Credit Opportunity Act (ECOA) by charging non-Asian customers higher interest rate markups than other customers for a period of at least three years. Union Auto Sales agreed to pay $125,000 to resolve the lending discrimination charges against it.
A Department of Justice complaint filed in federal court in Los Angeles in March 2010 alleged that Union Auto Sales doing business as Union Mitsubishi, as well as others charged higher interest rate markups on car loans to non-Asian customers, many of whom were Hispanic, than to similarly Asian customers.
It is common practice for banks and other lenders to set a base interest rate or so-called “buy rate” and then for the auto dealership to “mark up” the interest rate to the final rate the customer pays on the loan for the car. The complaint alleges that Union Auto Sales charged higher interest rate markups to non-Asian customers from at least 2004 to 2006, which constitutes lending discrimination.
“Every consumer should be treated fairly in the pursuit of credit, without regard to their race or nationality,” said Jocelyn Samuels, Acting Assistant Attorney General for the Civil Rights Division.
This case came from a referral from the Federal Reserve Board involving Nara Bank. DOJ entered into a partial consent decree with Nara Bank, a bank that financed many loans for Union Auto Sales and other car dealerships, in 2009. The partial consent decree required the bank to pay $410,000 to compensate several hundred non-Asian borrowers affected by the discriminatory conduct.
A copy of the complaint, the consent decree, and the partial consent decree entered into with Nara Bank, as well as additional information about fair lending enforcement by the Justice Department is here: www.usdoj.gov/fairhousing.