The US Department of Justice has started questioning JPMorgan Chase & Co over auto lending practices that might have caused discrimination, said the bank recently.
According to a filling with the US Securities and Exchange Commission, the biggest US bank said the Justice Department is currently investigating whether auto loans of car dealerships were marked up when it came to borrowers of different races and ethnicities. Currently, JPMorgan is the fifth-largest US auto lender after Ally Financial, Wells, Toyota’s in-house lending unit and Capital One Financial Corp, according to data from Experian Automotive. Back in December 2013 Ally had to settle a similar investigation that found discriminatory lending practices, paying the Justice Department and the U.S. Consumer Financial Protection Bureau a total of $98 million. Back in December Toyota Motor Credit Corp also announced its own enforcement action from US regulators in regards to allegations of violating fair lending laws.
According to Director Richard Cordray, the Consumer Financial Protection Bureau “has focused significant resources on rooting out discrimination in indirect auto lending,” with lenders obligated to reimburse 425,000 consumers around $136 million after being discriminated in loans. Lenders and car dealers have responded by criticizing the methodology the US authorities usually used to find whether the former were bias against minority leasers. Government calculations may create the appearance of differential pricing…when none exists,” said the American Financial Services Association, and four other industry groups in a recent letter addressed to the authorities. According to them, the statistical methods that determine if borrowers were discriminated had high error rates.