Chances are, if you are a woman, African American or Latino and financed an automobile at a dealership, you paid more than a similar white customer. Even in 2015.
It’s essentially a “black tax” of around $500 on many vehicles purchased by women or people of color. And while it’s obviously illegal and unjust, dealerships found it lucrative to “mark up” loans to profit off black customers in a way they did not often do to whites. That is why the Consumer Financial Protection Bureau moved last week to impose new rules on auto financiers in order to put more teeth on anti-discrimination laws.
Since 1991, studies have shown that dealerships select people of color for “special treatment,” marking up loans to black, Latino and women customers twice as often. On average, a black customer will end up with an interest rate on their auto loan that is three-tenths of a percentage point higher than that of a white customer with the same credit rating; for Latinos, the markup is two-tenths of a percentage point higher.
Richard Cordray, director of the CFPB, calls such discrimination both “wrong and deeply unfair to consumers.” The CFPB will not speculate as to the scale of the injustice (over 12 million car loans were made last year), but in a single case against Ally Bank it was able to return $80 million to victims of loan discrimination.
This type of loan discrimination has been illegal since 1974, yet like many other civil rights laws, it was not enforced. When the CFPB first moved to crack down on discrimination, the National Automobile Dealers Association (NADA) begged Congress to intervene on its behalf. After all, they pocket $25.8 billion a year from markups, much of it by preying on people of color. They say they don’t approve of customers being discriminated against because of race or gender, but when ensuring that doesn’t happen cuts into their profits, enforcement becomes “bureaucratic overreach.”
As the CFPB cracks down on more and more corporate abuses, Republicans have found that fighting to kill the agency is a successful fundraising tactic. Senate Majority Leader Mitch McConnell, for example, told his donors that, should he have his way, “we wouldn’t have the agency at all.” Obama has vowed to veto any such bill, but Congress has other ways.
When the Republicans couldn’t cut taxes or environmental regulations, they instead cut the budgets for the Internal Revenue Service and the Environmental Protection Agency by 10 and 20 percent respectively, hampering their ability to implement and enforce the law. Should the GOP get its hands on the CFPB budget, we would likely see our financial rights defunded out of existence.
The Federal Reserve currently oversees the Consumer Financial Protection Bureau’s budget, but the Republicans have plans to change that. If they win that battle, they claim they will hold the Bureau “accountable.” The question is, to whom? Probably not the millions who faced discrimination at the dealership.