WASHINGTON (AP) — Ally Financial Inc. is paying $98million to resolve U.S. government claims that
minority borrowers werecharged higher rates on its auto loans than whites with similar credithistories.The
agreement announced Friday by the JusticeDepartment and the Consumer Financial Protection Bureau is
thegovernment’s biggest auto-loan discrimination settlement to date.Allyis paying $80 million in damages to
about 235,000 African-American,Hispanic and Asian and Pacific Islander borrowers, and $18 million
inpenalties. The higher rates were charged on auto loans between April2011 and December 2013, according to
the government.Detroit-basedAlly is one of the largest indirect auto lenders in the U.S. Allydoesn’t make
auto loans directly to consumers; it buys the loancontracts made by auto dealers. Ally sets an interest rate
for the loansand allows dealers to charge customers a higher rate, or dealer markup.Thegovernment says the
system gives Ally an incentive to allow autodealers to charge higher markups. Ally failed to adequately
monitorrate-setting by dealers, the government said.Ally says it sets rates based only on borrowers’ credit
profiles and that it doesn’t practice or condone discrimination.Allysaid in a statement that "based on
the company’s analysis of itsbusiness, it does not believe that there is measurable discrimination byauto
dealers."At the same time, Ally said it takes thegovernment’s allegations "very seriously"
and has agreed to thesettlement terms. The company said it expects to take a $98 millioncharge against
fourth-quarter earnings for the settlement.Governmentofficials said they have not accused Ally of
deliberatelydiscriminating against minority borrowers in its rate-setting. Butwhether the action is
deliberate or not matters little to the borrowerswho are discriminated against, they said.Under the
settlement,Ally will have to monitor dealers’ rate-setting to prevent furtherdiscrimination or eliminate the
dealer markups. A compliance program tobe established by Ally will include education of dealers
aboutanti-discrimination laws and taking action against dealers whendiscrimination occurs."We are
taking a firm stand againstdiscrimination in a critical lending market," Attorney General EricHolder
said in a statement. "By requiring Ally to provide refunds tothose who are overcharged because of their
race or national origin, thisagreement will ensure relief for Americans who are victimized."TheNational
Automobile Dealers Association said it fully supports theanti-discrimination laws but it criticized the
approach taken by theregulators in the settlement with Ally."The CFPB continues towithhold the secret
methodology it uses to determine whetherunintentional discrimination has occurred," the group said in
astatement. "The public still does not know whether the (CFPB) takes intoaccount legitimate factors
that can affect finance rates — for example,a dealer’s ability, regardless of race, to lower the interest
rate tomeet a customer’s monthly budget."Ally, the former auto loan andmortgage arm of General Motors,
received a $17.2 billion federal bailoutat the height of the financial crisis, to save the company and
keepauto loans flowing. Ally has repaid roughly $12 billion. The TreasuryDepartment still holds a 64 percent
stake in Ally, with the rest held bya mix of institutional investors.GM said last week it has soldits 8.5
percent stake in Ally for about $900 million, expecting torecord a gain of $500 million from the sale in its
fourth-quarterearnings.Copyright 2013 The Associated Press. All rightsreserved. This material may not be
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