Honda to pay $25 million fine for overcharging minorities

This image was removed due to legal reasons.

Honda has settled a claim that it overcharged thousands of black, Hispanic and Asian/Pacific Islander auto loan borrowers over the course of several years.

In looking into the Japanese automaker’s lending practices, investigators determined that black borrowers were paying $250 more on average during the term of their loans, Hispanics were paying over $200 more during the term of the loan, and Asian/Pacific Islanders were paying over $150 on average.

Investigators concluded this was happening because of Honda’s policy of allowing dealers to include markups on interest rates beyond objective criteria like credit scores. The practice occurred at least between January 1, 2011 and July 14, 2015.


“Honda knew or had reason to know that its policy and practice of allowing dealers to mark up consumers’ interest rates created a substantial risk of discrimination,” the complaint says. “During this time, Honda did not monitor markup disparities.”

The complaint is similar to one recently lodged against a California-based mortgage lender. The company’s mortgage lending employees were given the same discretion to set borrowing terms, and a similar pattern of overcharging minorities resulted.  While it is common for individual lenders to enjoy some leeway in setting borrowing terms, in many cases the employees are compensated for the increased interest revenue generated.

Honda has agreed to change the way it prices its loans by capping limiting dealer markups. The settlement also provides $24 million in compensation for alleged victims of past discrimination by the nation’s ninth largest auto lender, and $1 million to fund a consumer auto finance education program designed to benefit African-American, Hispanic and Asian/Pacific Islander populations.

Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.

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