Join Date: Feb 2001
Location: The Hills of North Georgia,USA
US:Ford Credit faces trial on bias charges
Ford Credit faces trial on bias charges
Automaker's finance arm denies it charged blacks more than whites for loans.
By Brett Clanton / The Detroit News
A class action lawsuit accusing Ford Motor Credit of racial bias in auto lending goes to trial today in Nashville, setting up a decision that could have far-reaching effects on auto financing for millions of American consumers and pose a threat to one source of profit for dealers.
The case is the first of its kind to go to court, and comes after high-profile settlements last year on the same issue at General Motors Acceptance Corp. and Nissan Motor Acceptance Corp.
In this case, Primus Automotive Financial Services Inc., a branch of Ford Credit that does business as Mazda American Credit, Land Rover Capital and Jaguar Credit, is accused of charging African-Americans more for auto loans than whites, even when their credit scores are the same.
The lawsuit attacks Primus for permitting car dealers to inflate, or "mark up," interest rates on auto loans for extra profits -- a practice that, if eliminated, could take away a key source of dealer revenue.
"It's going to be a real bellwether case," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety in Sacramento, Calif., and a critic of auto loan mark ups.
While loan markups are not illegal, plaintiffs in similar cases allege that dealers routinely charge minorities more for financing, regardless of their credit scores, and that lenders turn a blind eye.
But Ford Credit spokeswoman Meredith Libbey said the charges could not be true because Ford has a computerized -- and colorblind -- process for approving loans.
Other auto finance companies have used the same argument in similar class action suits, but have then gone on to settle out of court. Ford, however, wants the case tried to clear its name.
"We expect to win," Libbey said. "This lawsuit is all about attorney's fees."
Last summer, Ford said it would cap loan markups to prevent abuses. Today, Ford limits loan mark ups to 2.5 points more than the interest rate a customer's credit score recommends. On loans with terms longer than 60 months, the cap is 2 points.
During the past year, Ford has also added language to lending contracts explaining that interest rates are negotiable and that dealers may retain a portion of financing charges as profit.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....