Ally Bank ordered to pay $80 million to consumers harmed by discriminatory lending

More than 235,000 African-American, Hispanic, and Asian Pacific Islander borrowers, who were charged higher interest rates on their auto loans from Ally Bank, based on their race, stand to get back $80 million, thanks to courageous action by the Consumer Financial Protection Bureau and U.S. Department of Justice.

The consumer protection and law enforcement agencies are coordinating their efforts to curb discriminatory lending in auto loans, which cost car buyers billions of dollars in hidden extra fees, while fattening the profits made by lenders and auto dealers. This is the government’s largest auto loan discrimination settlement ever.

“Discrimination is a serious issue across every consumer credit market,” said CFPB Director Richard Cordray. “We are returning $80 million to hard-working consumers who paid more for their cars or trucks based on their race or national origin. We look forward to working closely with the Justice Department and Ally to make sure this serious issue will be addressed appropriately in the years ahead as well.”

Read more: CFPB and US DOJ order Ally to pay $80 million to car buyers


Senator Elizabeth Warren: Close the Car Dealer Loophole

Should auto dealers, who write tens of billions of dollars in auto lending contracts each year, evade regulation by the nation’s leading agency for policing consumer financing?

US Senator Elizabeth Warren recently made it clear that she thinks the answer is NO.  While questioning Richard Cordray, Director of the Consumer Financial Protection Bureau, who was testifying before the US Senate Banking Committee, Sen. Warren offered this opinion:

“As you know, the CFPB has authority over nearly every kind of consumer loan, but the big exception is car loans. The CFPB has done great work in this area [focusing on lenders, but not dealers]…But it makes no sense to me that there should be any exception here for consumers who are being tricked out of billions of dollars every year on car loans.”

Sen. Warren conceived of the idea of an independent consumer financial watchdog agency, and worked hard to make it a reality.  During the debate over whether to include auto dealers, they misled members of Congress and the public, repeatedly claiming they are “Main Street, not Wall Street.”

However, the reality is quite different. Hundreds of dealerships are owned by large, publicly traded dealership groups that are publicly traded and sold on Wall Street.  For example, AutoNation, based in Florida, owns 221 dealerships across the U.S. and took in over $15.6 billion last year.  AutoNation’s largest investor is Bill Gates.

Does anyone seriously believe that fits the description of “Main Street”?

Read more: Warren: Close CFPB’s dealer ‘loophole’





Good news for car buyers — Richard Cordray Confirmed!!

At last, in a huge, sweet victory for struggling consumers, Richard Cordray has been confirmed as Director of the Consumer Financial Protection Bureau. The CFPB, first envisioned by now-Senator Elizabeth Warren, was created to be a watchdog for consumers in the financial marketplace.

Democratic legislators in Congress created the agency when they voted for the Dodd-Frank Wall Street Reform Act, in the wake of the largest financial meltdown since the great Depression.

Since then, Republicans in Congress have tried repeatedly to weaken the agency and put it under their thumbs. That way, they could tie it in knots and keep it from doing its job.  Republican senators had blocked Cordray’s nomination for years, and relented only when Democratic Senators forced their hand, by threatening to change the filibuster rules that had allowed the Republican minority, at the behest of powerful, unscrupulous special interests, to block a vote on Cordray’s nomination and other nominations to vitally important posts that directly affect the lives of  ordinary Americans.

Cordray’s confirmation is a huge victory for President Obama, US Senator Elizabeth Warren,  the consumer and labor movements and allied groups, and other pro-consumer forces who joined together to form Americans for Financial Reform. And for all the individual consumers who petitioned Congress and spoke up for letting the agency do its job.

Republican members of Congress, and some Democratic members, led by US Rep. Gary Peters of Michigan, granted auto dealers a special exemption from the Consumer Financial Protection Bureau’s authority, under the false claims that they don’t engage in lending themselves (they do), and that they’re not traded on Wall Street (many of them are).

However, the CFPB does have authority to police auto lending. It may also act to curb lenders from taking away consumers’ Constitutional rights when they purchase a car, trapping them with “arbitration” clauses that keep them captive to a secret, private “arbitration” system that the lenders control.

This is welcome news indeed for the car-buying public. The agency has already issued a warning to auto lenders not to keep engaging in discriminatory lending practices that result in minority car buyers paying more for financing — not based on their creditworthiness, but on race.

The agency may also issue rules to curb auto dealer markups on interest rates, that cost car buyers over $25.8 billion annually in excessive interest charges pocketed by dealers and lenders — money that could be spent on technology that saves lives and helps clean the air and slow climate change.

If you have a complaint about auto lending, here’s where to complain at the CFPB:

Consumer Financial Protection Bureau–file a complaint here







Auto dealers granted special exemption from Dodd-Frank based on lies

Auto dealers are directly responsible for writing up the lion’s share of the $850 billion auto lending market. Like home mortgages, most of those loans are then packaged, securitized and sold on Wall Street to investors — spreading the risk around. New and used car dealers are also the leading source of consumer complaints to state and local consumer protection agencies and the Better Business Bureau.  They played a major role in the collapse of the economy and the recession.

Despite years of being warned by economic analysts that their predatory practices were a “house of cards” that would inevitably collapse, they failed to rein in their abuses. Instead, their practices went from bad to worse — including falsifying loan applications and forging signatures on documents, and selling cars they didn’t even own — massively defrauding the public, banks, and other dealerships.

So why aren’t they regulated under the Dodd-Frank Wall Street Reform Act?

Simple. It’s because they were granted a special exemption, by Congress. The claim that dealers made, to rationalize this special treatment, was that auto dealers are supposedly “Main Street, not Wall Street.” This talking point became their oft-repeated refrain with members of Congress and the press.  Never mind that it was laughably false.

Former U.S. Senator Sam Brownback (R-Kansas) presented the amendment to give the special exemption from Dodd-Frank to auto dealers, on the Senate Floor. Not surprisingly, he merely mouthed the car dealer line about their not being part of Wall Street.  He claimed that car dealers

“are the quintessential Main Street business throughout the country. There’s not a single auto dealer on Wall Street. None of them. Not a one. You can go up there today and try to buy a car and you can’t get one. These are Main Street businesses.”

Too bad what Sen. Brownback told his Senate colleagues was totally false.  A simple check of readily available public filings would have revealed that actually over 1,000 dealerships are owned by huge automotive dealership chains that are indeed traded on Wall Street.

Exhibit A: the behemoth AutoNation, based in Florida, which owns more than 215 dealerships, and took in over $13 billion during 2011. Bill Gates is one of the major investors who owns shares of AutoNation. Hardly most people’s idea of Main Street.

Here’s a link to Brownback’s floor speech, recorded by C-Span and posted on the U.S. Senate website. Sen. Brownback’s speech appears approximately 2 hours and 53 minutes after the recording starts:

May 24, 2010 Floor Debate over Dodd-Frank Wall Street Reform Act

Reality check:  Among the leading auto dealership chains that are publicly traded on Wall Street (revenue based on figures from Automotive News, March 12, 2012 — for the year 2011):

AutoNation — 215 dealerships, over $13 billion in revenue

AutoNation’s filings with the Securities and Exchange Commission

Penske Automotive Group — 145 dealerships, over $11 billion in revenue

Penke’s filings with the SEC

Sonic Automotive — 119 dealerships, over $7 billion in revenue

Sonic’s filings with the SEC

Asbury Automotive Group — 79 dealerships, over $4 billion in revenue

Asbury’s filings with SEC

Apparently Sen. Brownback was so gullible, he believed what the auto dealers told him and fell for their line about being Main Street, not Wall Street, without bothering to check the facts.  You can draw your own conclusions about his intelligence, or motives. Let’s just say that if you’re buying a car, he’s probably not someone you would want to ask for advice on how to get a good deal.

So — if you’re ripped off by an auto dealer, who would otherwise be policed by the new Consumer Financial Protection Bureau, created under Dodd-Frank, who do you have to blame?  Well, the dealer, of course. Plus former Sen. Brownback, who is now the Republican Governor of Kansas. Plus all the members of Congress who failed to stand up to the auto dealer lobby, whether because they were so ignorant about the business, or gullible, or just plain corrupted by auto dealer cash. Interestingly, all the Republicans voted to exempt the car dealers, who are among their biggest sources of campaign cash. Most Democrats voted against the exemption, which was opposed personally by President Obama.

And if you’re ripped off by an AutoNation dealership, you can blame one of their largest shareholders, who profits from their billions in revenue — Bill Gates.