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Honda Finance Agrees to Pay $24 Million to Remedy Unfair Loan Rates
Honda Motor Co.'s U.S. finance arm will contribute $24 million to a fund to compensate minorities who were charged higher rates for car loans over the past two years.
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Honda Motor Co.'s U.S. finance arm will contribute $24 million to a fund to compensate minorities who were charged higher rates for car loans over the past two years.
The U.S. Dept. of Justice and Consumer Financial Protection Bureau claim American Honda Finance Corp. charged higher rates to thousands of African-Americans, Hispanics and Asia-Pacific customers solely because of their race.
Members of those groups respectively paid an average $250, $200 or $150 more per loan than white customers with similar credit histories, according to the complaint.
Honda Finance doesn't make loans directly to consumers. It processes such financing through applications submitted by dealers. The lender sets an initial interest rate based on the applicant's creditworthiness, but dealers have had discretion to mark up the recommended rate.
As part of the settlement, Honda Finance will now limit dealer markups to 1.5% for loans of 60 months or less and 1% for longer-term deals.
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