Rate Gap Could Narrow As Result Of Recent Lawsuit Settlements
May 8, 2007
By WILL LESTER, Associated Press
WASHINGTON -- Black people have been charged higher auto loan rates than other auto buyers, federal research says. But the gap in loan rates could narrow, and possibly disappear, as the result of recently concluded lawsuits.
Blacks paid a typical auto loan rate of 7 percent for new cars, compared with a rate of 5 percent for whites in 2004, according to a consumer organization's analysis of the Federal Reserve Survey of Consumer Finances. That was the most recent survey available.
And blacks were more likely than auto buyers in general to have auto loan rates higher than 15 percent. For used car loans, 27 percent of blacks who buy cars were charged interest rates of 15 percent or more. Blacks were three times as likely as whites - 27 percent to 9 percent - to have auto loan rates at least that high.
Latinos were paying a typical rate of 5.5 percent for new car loans, and 19 percent of Latinos had loans for used cars above 15 percent, the analysis found.
Lenders' suggested quote rates are based largely on the buyer's credit history, but auto dealers often raise the rate higher than that risk-related rate without discussing the rate with the customer, consumer advocates said. And they question the causes of those rate differences.
"It's hard to believe that any differences in creditworthiness explain all of these rate gaps," said Stephen Brobeck, executive director of the Consumer Federation of America. "They size you up, the car salesmen and finance and interest guys. They must think African Americans are more vulnerable to a markup."
But a series of legal actions against auto finance firms seeking fair treatment for minority-group members could help solve that problem.
Source:
http://www.courant.com/business/
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