Posted on July 30, 2004

Honda’s U.S. Unit Allegedly Hiking Interest For Blacks

Japan Times Online, Jul. 30

WASHINGTON (Kyodo) Black Americans are required to pay higher interest on loans than their Caucasian counterparts when they finance their cars through American Honda Finance Corp., the U.S. loan unit of Honda Motor Co., according to the Consumer Federation of America.

The federation said a fresh study by Mark Cohen, an expert witness for plaintiffs in class-action lawsuits against automakers, shows that 43.3 percent of black American borrowers are charged higher interest, compared with 22.2 percent for Caucasian borrowers.

Black borrowers on average pay more than twice the amount in subjective interest — $557 — compared with $227 for Caucasian borrowers, the study shows.

“AHFC’s credit pricing policy has a differential markup cap based on credit tier. While most customers are limited to either a zero or 2 percent markup, the least creditworthy tier allows for a 3.5 percent markup for buyers of new cars,” wrote Cohen, a professor at Vanderbilt University.

“The effect of this higher markup predictable aggravates the disparity and especially disadvantages those who can least afford it. There appears to be no business justification for this differential markup policy.”

Citing his latest study and previous findings involving the loan units of General Motors Corp., Nissan Motor Co. and Ford Motor Co., he said there is strong evidence that “the industrywide practice of subjective credit pricing results in a disparate impact on minorities.”

American Honda Motor Co. said in a statement it does not tolerate any discriminatory loan practices.

“American Honda and American Honda Finance Corp. require its dealers to follow fair lending practices as stated clearly in their dealer agreements and as required under applicable law,” the statement says.

“Honda does not and will not tolerate any conduct by its dealers that discriminates against customers or credit applicants on any basis. Due to pending litigation on this matter, American Honda will not be able to provide further comment.”