Ally agrees to pay $98 million to settle discrimination lawsuit
The Department of Justice announced in a December 20, 2013, press release that Ally has agreed to pay $98 million to settle a discrimination lawsuit.
The Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) filed the lawsuit in the U.S. District Court for the Eastern District of Michigan.
The settlement is the largest, in the country’s history, against an auto loan provider. According to the DOJ, Ally has agreed to pay $80 million to the victims and $18 million to the CFPB’s civil penalty fund. The $80 million payment to the victims has to be approved by a federal district judge.
The federal government alleged that Ally used race as a factor to determine the amount of interest a buyer would pay on his car loan. There were approximately 235,000 African-Americans, Hispanics, and Asia/Pacific Islanders who were charged higher interest rates.
The federal government alleged that the “average victim” paid $200-$300 extra during the loan’s term, and that the discriminatory practices have been going on since April 2011.
In a December 20, 2013, press release, Ally denied any wrongdoing and stated that the company uses a customer’s credit score, and not his race, to determine the amount the customer will pay on a loan.
Ally said, “Ally does not engage in or condone violations of law or discriminatory practices, and based on the company’s analysis of its business, it does not believe that there is measurable discrimination by auto dealers.”
Ally went on to say that it will adhere to the terms of the agreement, which also includes monitoring a car dealer’s practices in determining the price of a loan.
Ally was previously owned by General Motors (GM). The bank received a $17.2 billion bailout, and has repaid the federal government $12 billion.
According to GM’s December 12, 2013, press release, GM sold the remaining 8.5% investment it had in Ally.
The sell left GM with a net amount of $500 million. The federal government owns 64% of Ally’s common stock, and the remaining 36% is owned by various investors.
Recently, the Federal Reserve granted Ally a financial holding company status. The new status will allow the company to expand beyond its banking business into other business areas.
The Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) filed the lawsuit in the U.S. District Court for the Eastern District of Michigan.
The settlement is the largest, in the country’s history, against an auto loan provider. According to the DOJ, Ally has agreed to pay $80 million to the victims and $18 million to the CFPB’s civil penalty fund. The $80 million payment to the victims has to be approved by a federal district judge.
The federal government alleged that Ally used race as a factor to determine the amount of interest a buyer would pay on his car loan. There were approximately 235,000 African-Americans, Hispanics, and Asia/Pacific Islanders who were charged higher interest rates.
The federal government alleged that the “average victim” paid $200-$300 extra during the loan’s term, and that the discriminatory practices have been going on since April 2011.
In a December 20, 2013, press release, Ally denied any wrongdoing and stated that the company uses a customer’s credit score, and not his race, to determine the amount the customer will pay on a loan.
Ally said, “Ally does not engage in or condone violations of law or discriminatory practices, and based on the company’s analysis of its business, it does not believe that there is measurable discrimination by auto dealers.”
Ally went on to say that it will adhere to the terms of the agreement, which also includes monitoring a car dealer’s practices in determining the price of a loan.
Ally was previously owned by General Motors (GM). The bank received a $17.2 billion bailout, and has repaid the federal government $12 billion.
According to GM’s December 12, 2013, press release, GM sold the remaining 8.5% investment it had in Ally.
The sell left GM with a net amount of $500 million. The federal government owns 64% of Ally’s common stock, and the remaining 36% is owned by various investors.
Recently, the Federal Reserve granted Ally a financial holding company status. The new status will allow the company to expand beyond its banking business into other business areas.
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