Investor's Business Daily, January 15, 2014
Attorney General Eric Holder has opened up a new front against car lenders and has forged an alliance with the Consumer Financial Protection Bureau to frame them for racism, too.
His department and the president’s new consumer credit watchdog agency, CFPB, have announced a new settlement with Ally Bank for nearly $100 million.
It’s the largest fair lending deal against the auto industry and the third-largest ever to resolve charges of lending discrimination.
Throw in four new mortgage-lender settlements over equally groundless allegations — including last month’s $35 million joint Justice Department-CFPB hit on Cleveland-based National City Bank — and the total financial industry shakedown by this administration now stands at an eye-popping $810 million.
In its complaint against Ally, Justice alleged that the bank “charged African-American borrowers more than white borrowers in interest-rate markups not based on creditworthiness or other objective criteria related to borrower risk.”
It says a statistical analysis of loans conducted by CFPB researchers found a “disparity” of 29 basis points compared with rates charged “similarly situated” white borrowers.
The surcharge is so “statistically significant,” it contends, it can’t be a function of anything but racism.
Let’s unpack that statement, because it contains a big load of rubbish.
For starters, Justice had to guess the race of Ally’s black customers from Census data for black neighborhoods. The auto-finance industry does not report the race of borrowers like the mortgage industry.
“Ethnicity data is not available,” the department confesses later in the complaint.
So “victims” were never actually identified. That’s why the complaint has to estimate that Ally discriminated against “approximately” 100,000 African-American borrowers.
More shocking, civil-rights prosecutors never actually checked the creditworthiness of those borrowers. That’s right, they never looked at credit scores, down payments, debt or other key risk-related factors banks consider to set interest rates. Not for blacks, or for supposedly “similarly situated” whites.
Ally says it’s guilty of nothing more than pricing for risk, a legitimate business practice common in the industry for centuries.
So why did it roll over?
The same reason the other 30 banks targeted by Holder have played dead: to avoid a protracted legal battle with the federal government and protect their all-important corporate brand.