You may have seen the article the NY Times ran on certain subprime auto loans and how they hurt the poor. Now there is evidence that some lenders are raising the rate on loans to racial minorities.
From Bloomberg: “JPMorgan Chase & Co., the largest U.S. bank, said it’s in talks with the Department of Justice about possible racial disparities in markups that auto dealers charged on loans.
“The discussions focus on ‘potential statistical disparities’ on debts originated by dealers and purchased by the bank, New York-based JPMorgan said Tuesday in an annual regulatory filing. It didn’t specify whether the firm is a target of the probe.
“The Justice Department and U.S. Consumer Financial Protection Bureau have been investigating auto lenders for possible racial discrimination, after finding ‘significant risk’ of unfair pricing, senior officials said in 2013. The CFPB warned that year that large banks may face lawsuits if they buy discriminatory loans made by dealers.” More here.
Nissan went through a lawsuit regarding auto-loan discrimination in 2001, described here, at the NY Times.
In addition to the concern about racial disparities in lending, the bundling of questionable auto loans into investments may raise red flags given what happened with the bundling of questionable mortgages not that long ago.