Fifth Third to pay $18M after discrimination allegations against - Cincinnati News, Weather, Sports from FOX19 NOW-WXIX

Fifth Third to pay $18M after discrimination allegations against minority auto loan borrowers

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An $18 million settlement has been reached after an investigation by the Department of Justice and the Consumer Financial Protection Bureau (CFPB) alleged that Fifth Third Bank engaged in systematic discrimination against African-American and Hispanic borrowers in its indirect auto lending business.

The Cincinnati-headquartered bank, Fifth Third, violated the Equal Credit Opportunity Act by charging African-American and Hispanic customers higher dealer markups on auto loans than white borrowers, according to CFPB.

CFPB found that the average African-American and Hispanic borrower was obligated to pay over $200 more from January 2010 during the term of the loan because of discrimination, according to the complaint.

The settlement, subject to court approval, includes compensation for African-American and Hispanic borrowers who were overcharged, and requires changes to the way that Fifth Third prices automobile loans, according to the Department of Justice.

“Consumers deserve a level playing field when they enter the marketplace, especially when financing an automobile,” said U.S. Attorney Carter M. Stewart of the Southern District of Ohio.  “This settlement prevents discrimination in setting the price for auto loans.”

Fifth Third is the ninth-largest bank indirect auto lender in the United States. The banks set a risk-based interest rate, known as the "buy rate." Dealers are then able to charge consumers a higher interest rate not based on credit risk. The bank has agreed to change the way it prices its loans by limiting dealer markup to 125 basis points, or 1.25 percent, for loans of 60 months or less, and to 100 basis points, or one percent, for loans greater than 60 months.  

"We are committed to promoting fair and equal access to credit in the auto finance marketplace,” said CFPB Director Richard Cordray.  “Fifth Third’s move to a new pricing and compensation system represents a significant step toward protecting consumers from discrimination."

The settlement also requires Fifth Third to improve its monitoring and compliance systems after it did not provide adequate constraints or monitoring across its portfolio of loans to prevent the discrimination. 

An administrator will locate victims and distribute payments of compensation at no cost to borrowers who the department and the CFPB identify as the victims of Fifth Third's discrimination. 

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