Published: July 11, 2001
New
study reveals racial
discrimination in car loans
Assembly Majority Leader Kevin Shelley calls for investigation, potentially consumer refunds
July 10, 2001 - (Sacramento) - Assembly Majority Leader Kevin Shelley, D-San Francisco, called upon Attorney General Bill Lockyer to investigate racial discrimination by auto dealers when offering loans.
A new statistical study conducted by Vanderbilt University Professor Mark Cohen shows that in 33 states including California black customers paid more than white customers with identical credit ratings when taking out auto loans.
"Racial discrimination sometimes shows up in disguise and it takes a study to unmask it," said Shelley. "When I see racial discrimination in any form, I do all I can to end it."
If such an investigation proves to be conclusive, Shelley will introduce legislation to prevent future discrimination and possibly seek refunds for victimized customers.
"This form of discrimination hits black families in their pocketbooks said Shelley. "Imagine walking into a grocery store and seeing different price tags for black customers. That's essentially what's happening with interest rates on auto loans."
Shelley is also bringing forth a resolution in the Assembly to condemn racial discrimination in auto lending.
The Cohen study examined more than 300,000 auto loans arranged through Nissan dealers from March 1993 to September of 2000. This is believed to be the largest sample of car loan data ever studied for racial patterns.
"Lenders can no longer use economics as an excuse for charging black customers more," said Shelley. "This study compares customers with the same credit ratings. The only variable is race."
Discrimination is believed to occur during the practice of dealer markup. Lenders establish interest rates for customers based on income and credit history. Dealers are then given the option of adding several percentage points onto the established rate. The profit from the markup is split between the dealer and the lender.
In California, Cohen found that the markup for black car buyers is on average $326 more than that for white car buyers who were charged a markup. Nationally, the difference is $608.
Moreover, an earlier study conducted by Cohen revealed that black customers were more than twice as likely as white customers to have a dealer markup tacked onto their pre-determined interest rate.
Class-action lawsuits have been filed against the financing arms of Nissan, General Motors Corp., DaimlerChrysler AG, Toyota, and Ford Motor Co. for racial discrimination.
Click Here to email this page to a friend |
