Consumer bureau shines light on discriminatory auto lending

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The bulletin is aimed at so-called "indirect auto lenders," which are third-party lenders that dealers work with to provide car financing options. Typically, such lenders allow dealers to charge a costlier interest rate as part of a "dealer markup," as the dealer typically gets a cut of the revenue made from the higher rate.

The CFPB said such policies increase the risk of pricing disparities by dealers, and cited research indicating that African-American and Hispanic borrowers typically pay a higher markup than other similar white borrowers.

The bureau urged auto lenders engaged in this indirect practice to tighten up policies dictating exactly how much dealers could alter the interest rate. Lenders should closely monitor those policies and, if needed, stop giving dealers the ability to mark up rates. Instead, lenders could pay dealers a flat fee to fairly compensate dealers who avoid the practice, according to the agency.