Honda Motor Corporation has finally settled the clash with national supervisors by agreeing on the $24 million refund to the range of borrowers whom they had charged higher interest rates compared to their ‘white’ counterparts spurring the allegations of discrimination on racial grounds.
The Los Angeles Times states that a category of the agreement officials vowed to bring about a transformation in the ways of pricing loans for dealership mark-ups. Current rating policies are estimated to have cost Latino, Asian and African borrowers over $250 higher taxes than the standard rates applicable to the ‘whites’ for auto loans.
Honda has been accused abusing the financing practices that allow dealerships to mark the individual loans. The company’s illegal discrimination has not only triggered legal unrest but also, enraged the victim communities. Honda is facing a tough time from social enthusiasts of from various parts of the World including Los Angeles itself.
Records have already proved that Honda had been charging minority car purchasers a higher rate of tax on their loans compared to that of the non-minority purchasers with the same credit histories.
The respective authorities from the company are being assigned the job of contacting the borrowers and issuing them their refunds for the extra money paid. Honda has agreed to pay $1 million to finance an education program on automobile loans for the minority communities.
Honda is the ninth largest auto loan lender of the country and has had to agree to limit their dealer mark-up liberties to 1.25 percent point for a loan of up to 5 years and a 1 percent point for any tenure longer than that.
The company has also had a tiff with government agencies regarding their methodology of the determination of auto pricing for minority groups. The company chose to term it has ‘a difference of opinion’ while also claiming that ‘fair lending’ is a crucial matter that needs immediate addressing.
The Justice Department and the bureau of consumers have been focusing closely on the issue of racial discrimination in the auto lending industry for quite a few years now. The last popularly known case of a similar discrimination was in 2013, when the Ally Financial Inc. had to agree to pay $98 million in order to compensate for similar allegations.
The company however maintains that they ‘strongly oppose’ any kind of discrimination and that they believe their money lending policies have remained ‘fair and transparent’. They want to account for the irregularities in loan prices to the individual mark-up system they are entitled to. Hence, the limitation on their financing policies.
The verdict on the mark-up cap is a major breakthrough regarding the problem of uncontrolled discrimination against various minority communities. This problem can finally be spotted and curbed.
Disappointed officials and citizens claim that the case is not a story of a victory, but only an indication of many such instances of discrimination going on uncontrolled on a large scale with nothing to be done about it. Though the issue is settled, the bottom line remains, the problem should not have occurred in the first place.
