When federal regulators launched a crackdown on alleged discrimination in auto lending two years ago, they knew their methodology would be questioned, but they calculated they could secure a market-shaping settlement by going after a company unlikely to fight the charges because it needed to avoid a complaint to clinch government approval for a broader restructuring, the Wall Street Journal reported today. That is the conclusion of a report, based on internal documents and emails written by the staff of the Consumer Financial Protection Bureau, released yesterday by congressional Republicans who have long criticized the discrimination probe. “Some of the claims being made in this case present issues…that would pose litigation risks…,” CFPB staff members wrote in one 2013 memo addressed to the bureau’s director, Richard Cordray, which was included in the report. But such concerns, the officials said in the same 23-page document, would be offset by the likelihood of a settlement by the target company, Ally Financial Inc. The $98 million settlement with Ally was the government’s biggest case involving alleged discrimination in the auto-loan market and the first case for the CFPB in the industry. The regulators accused the auto lender, formerly known as GMAC, of offering a pricing system that resulted in 235,000 minority borrowers being charged higher interest rates than white customers by auto dealers. The report released yesterday was put together by the Republican majority staff of the House Financial Services Committee, which has led the political charge by conservatives trying to defang the CFPB, created by the 2010 Dodd-Frank Act following the financial crisis. The report was released days after the House passed legislation that would rescind the bureau’s 2013 guidance aimed at protecting minority borrowers from being charged higher rates by auto dealers. The bill received bipartisan support, with 88 Democrats joining 244 Republicans. Read more. (Subscription required.)
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