With this recent discrimination case, does this make the Japanese carmaker Honda 60 years behind the times when it comes to issuing car loans in America?
By: Ringo Bones
As something that supposedly no longer happens in a post-racial America, Japanese carmaker Honda is currently in a 24-million US dollar settlement with the Obama administration to settle claims that the car company racially discriminated when it came to issuing car loans to its customers. A recent investigation by US regulators had uncovered that Honda charged customers who are African-Americans and Hispanic higher interest rates on their car loans. Regulators found out that African-American and Hispanic customers of Honda paid on average 250 US dollars more than their white-Anglo-Saxon counterparts regardless of their credit scores / creditworthiness. To those old enough to experience the 2008 Global Credit Crunch first hand, wasn’t this reminiscent of the 2007 era credit red-lining / credit reverse red-lining? Despite the findings of the investigation, Honda said in a statement that it “strongly opposes any form of discrimination”.
A US Consumer Financial Protection Bureau and the US Department of Justice said that America Honda Financial Corporation – the company’s loans arm, would change its pricing and compensation system to reduce the potential for discrimination. Despite the settlement, Honda said that it disagreed with how the two regulators determined discrimination, but “we nonetheless share a fundamental agreement in the importance of fair lending”. American Honda Financial Corporation (AHFC) does not make loans directly to customers but receives loan applications through car dealers. Those dealers have the discretion to vary a loan’s interest rate after an initial price Honda sets based on creditworthiness. The 24 million US dollars Honda will pay will go into a fund to compensate affected borrowers.