Honda to pay $24 million for discriminatory loans image
A finance arm of Honda Motor Co. from U.S. will pay $24 million in compensation over allegations that its loan pricing practices led to clients from racial minorities to pay bigger interest rates than Caucasian borrowers did according to U.S. regulators.
American Honda Finance Corporation (AHFC) will also change its pricing and restitution system to decrease the potential for discrimination as the U.S. Consumer Financial Bureau and Department of Justice announced. AHFC stated that it is opposed to discrimination. The company also said that it did not agree with the way the regulators determined discrimination, and that the firm shares a fundamental agreement regarding the importance of fair lending. AHFC does not offer direct loans to consumers as it receives the loan application through car dealers. These dealers can vary a loan’s interest rate after an initial price that Honda sets based on credit worthiness.
The complaint states that Honda has charged thousands of African-American, Hispanic and Asian/ Pacific Island car loans borrowers’ higher interest rates because of their race. The regulators said that an average African-American paid around $250 more during the loan. After reaching an agreement, the company decided to limit car dealers’ interest rate markups on Honda loans between 1 and 1.25%. American Honda Finance Corporation will pay $1 million for an auto finance education program designed for minority borrowers. Honda Motor Corporation has recently announced its recall for around 4.5 million more cars worldwide in order to replace the air bag inflators produced by Takata Corp. in a recent attempt to deal with a safety issue which has had car manufacturers globally recall tens of millions of cars.
By Gabriela Florea