(WI AG) Lautenschlager urges law change to protect minority car buyers

CBS Channel 5 ^ | 04/16/2005 | Ryan J. Foley

[Extremely Extreme Extremist]

Saturday April 16, 2005
BY RYAN J. FOLEY
Associated Press Writer

MADISON, Wis. (AP) Attorney General Peg Lautenschlager on Saturday called for changes to state law to allow her office to seek remedies for black and Latino car buyers who are charged higher rates than their white counterparts for auto loans from dealers in Wisconsin.

``Charging any citizen a higher rate because of the color of his or her skin is wrong, and it must end now,'' Lautenschlager said at a news conference in Milwaukee, where she was joined by a handful of Democratic lawmakers, including Sen. Spencer Coggs, D-Milwaukee.

Lautenschlager said her office had received complaints from black customers that their loans were being unfarly marked up and obtained data from a class action lawsuit against the American Honda Finance Corp. showing the practice was particularly widespread in Wisconsin.

A preliminary check by investigators in her office found dealer markups of as high as 4 to 6 percentage points for minorities, she said, compared to generally much smaller increases for whites.

Lautenschlager did not release the names of any of the dealers. In lawsuits in other states, dealers have disputed any discrimination.

Auto finance companies allow car dealers to subjectively add percentage points of interest to customers' loans despite a person's credit score. Dealers usually get to keep most of the extra charges.

In a report last year, the Consumer Federation of America said such markups were costing American car buyers hundreds of millions of dollars per year in extra charges, or an average of about $1,000 per customer. The markups hit one in four of all American car buyers, but affected minorities disproportionately, the study said.

The auto lending industry has voluntarily capped the markup at three percentage points and taken other steps as part of out-of-court settlements, but continues to face class-action lawsuits alleging the subjective nature of the policy allows discrimination against minorities.

Just last month, a federal judge in Tennessee said plaintiffs in a class-action lawsuit had proved a lending affiliate of the Ford Motor Co. discriminated against black customers by charging them higher rates on car loans.

Lautenschlager said the only recourse for Wisconsin customers now is for them to file federal lawsuits.

To bolster the state's ability to fight the problem, Lautenschlager called for:

A state law change proposed by Gov. Jim Doyle that would allow her office to bring lawsuits on behalf of Wisconsin residents who believe their civil rights have been violated. Several other states, including California and Illinois, already have such power.

The Department of Financial Institutions to demand financial documents from dealerships ``to determine the breadth and impact of this practice.''

The DFI to change an administrative rule to prohibit race-based discrimination in granting credit. The rules currently outlaw discrimination only on the basis of marital status and sex.

Changing state law so that all transactions are subject to regulations governing consumer credit transactions. Currently, all transactions over $25,000 are excluded, which includes many purchases of cars and homes.

Consumer advocates say car buyers should shop around to make sure they are getting the best price before signing loans with car dealers.

[Extremely Extreme Extremist]

Our Attorney General is a joke. This is what Rat AGs do - they focus on petty, trivial issues that benefit their special-interest supporters and go after honest businesses, while real criminals get away scot free.

[12 Gauge Mossberg]

Funny, the article doesn't mention that minorities generally have poorer credit than their white counterparts.

But that wouldn't serve the purposes of Mrs. Goldschlager.

[Mr Ramsbotham]

This entire affair could signify nothing more than that blacks are much easier to hoodwink than other groups. My understanding is that auto dealers are notorious for trying to make extra money by offering loans from high-interest lenders, often times for customers that wouldn't be able to get credit from another source.

I shop for my car loan before going to the dealer, and find the best rate I can get from a reputable institution. I'd trust my six-year-old with Michael Jackson before trusting an auto dealership with anything.

[End Times Sentinel]

Any possibility that the correlation may be between credit rating and interest rate, rather than race?  Usually when one prescibes the worst possible motives to an opponent, they're wrong.

Why would a car dealer want to risk losing a sale by jacking up an interest rate?  The most reasonable explanation is they know there's a very good chance (based on personal credit history) that an individual will default on the loan and the only way to recoup the impending loss is to raise the interest rate.

 

But that really doesn't do much to raise the ire of a democratic voting block even at the cost of demonizing and then Bulkanize American society, does it?

 

Owl_Eagle

(If what I just wrote makes you sad or angry,

 it was probably sarcasm)

[Extremely Extreme Extremist]

She doesn't have any evidence, just some complaints (probably paid off by the race-baiters) that minorities are being charged a higher rate.

I can't wait for the 2006 election. Hopefully enough Wisconsinites will send her and Doyle packing.

[NonValueAdded]

If minorities are charged higher rates despite good credit scores then this is a real problem. However, if the argument is that minorities have lower credit scores that cause the rates to be higher and therefore it is discrimination, then it is Barbara Streisand.

[No-Compromise Conservative]

My understanding is that auto dealers are notorious for trying to make extra money by offering loans from high-interest lenders, often times for customers that wouldn't be able to get credit from another source.

Not all auto dealers. My opinion is that some minorities are going to these "corner" dealerships (right next to those "payday loan stores") that offer "bad credit/no credit" financing on the spot. In general these rates are much higher than traditional dealerships, since the buyer can't get a loan from a bank or credit union.

Probably some minorities couldn't meet the monthly payment so now they're complaining about it to the state. Typical.

[Husker24]

Auto finance companies allow car dealers to subjectively add percentage points of interest to customers' loans despite a person's credit score. Dealers usually get to keep most of the extra charges.

I thought this was BS untill I read these two sentances, they should go by credit score alone.

[Finger Monkey]

How is Honda Finance to know that applicants are "minorities?" Honda Finance is apart from the dealerships. Honda Finance only looks at credit scores, etc., which are blind to race.

Stoopid, stoopid, stoopid.

Damn politicians. Damn them to heck.

[12 Gauge Mossberg]

If minorities are charged higher rates despite good credit scores then this is a real problem.

LOL, you're kidding right? This is nothing but beat-your-chest politics by an alcoholic, corrupt WI Attorney General and former Clinton appointee.

[nothingnew]

Lautenschlager

Is that some kind of Lithuanian sausage?

FMCDH(BITS)

[FlingWingFlyer]

I'll bet these people who are paying high loan rates are also "disenfranchised" voters. Those wascally DemocRATS never miss an opportunity to exploit minorities.

[joesnuffy]

Peg 'the keg' Lautenschlauger' 'laager slogger' Governor Doyle's sock puppet

Popper of pills.. drunk driver.. crasher of state vehicles that she had no business using as her (tax payer paid for) POV...

Panders to all special interest groups and unions whose support is easily purchased via liberal legislation and/or prejudicially enforced laws

It will be a great day in WI when these liberal left wing tyrunts take their jack boot of our necks and their grimmy paws out of our wallets

IMO

[DC Bound]

If minorities are charged higher rates despite good credit scores then this is a real problem.

Correction: If minorities are charged higher rates, based only on race, this is a problem. The simple fact is that these dealers are out to take as much money as possible, in whatever form possible, from who ever they can. In any business transaction that is negotiated, people who are under-educated are going to fare less well than those who are higher edumacated. Equal opportunity doesn't always generate equal results. I'd bet that orientals, also a minority detested by those prone to racial hate, don't get hoodwinked as often as blacks and hispanics. It's not about targeting races, it's empirical evidence that large segments of certain minorities don't understand how to buy a car. Are all blacks and hispanics targeted? No, obviously, because there are many who do understand how to negotiate a deal. This is pandering to the idiots who refuse to accept responsibility for their station in life.

[Mr Ramsbotham]

My opinion is that some minorities are going to these "corner" dealerships (right next to those "payday loan stores") that offer "bad credit/no credit" financing on the spot. In general these rates are much higher than traditional dealerships, since the buyer can't get a loan from a bank or credit union.

That's undoubtedly closer to the truth than the absurd suggestion that a business would risk its existence simply to discriminate maliciously against a particular class of people.

[maine-iac7]

Lautenschlager

How'd you like to a kindergartner and have to learn to spell that :O)

[Wally_Kalbacken]

This is a classic non-issue in the league of "racial profiling". If an identically situated black customer and white customer are charged different rates, it may be worth considering whether the difference was illegal discrimination based on race. The key proviso in that is identically situated. For the most part blacks represent higher risks of default or bankruptcy and the credit scores will reflect that. Risk based pricing has been present in the auto finance industry since the mid 1990's. If some dimwit (and the Wisconsin AG is one) proposes to equalize interest rates across race, regardless of risk - there will be a tremendous subsidization of blacks and their financial risky behavior by white borrowers.

[ServesURight]

Car dealerships are simply going to close up, rather than be hassled by lawsuits with intentional motives.

[DC Bound]

For the most part blacks represent higher risks of default or bankruptcy and the credit scores will reflect that. Risk based pricing has been present in the auto finance industry since the mid 1990's.

But their credit scores don't subtract a specific number of points because they are black and as a class they represent higher risk. If many blacks have personally, individually fouled up their credit scores, then as a class they will have lower credit scores. The key is still individual behavior. No auto dealers are saying "here's a black we can take advantage of." The "Risk based pricing" you mention doesn't consider race--only the risk demonstrated by a low credit score. Life insurance companies used to have separate mortality tables for blacks and whites, which showed a shorter lifespan, and thus higher premiums for blacks. They were forced to stop scheduling higher premiums for blacks not because they don't die sooner, as a whole, but because they were considering race--which is taboo no matter the merit of the consideration. These auto dealers aren't considering race. This is simply a case where equal opportunity (they're Americans) doesn't generate equal results.

If some dimwit (and the Wisconsin AG is one) proposes to equalize interest rates across race, regardless of risk - there will be a tremendous subsidization of blacks and their financial risky behavior by white borrowers.

Again, as it stands now, race isn't considered. The result looks racial, but that is merely because there are differences in races. Rates are not assigned based on race, although viewed in the aggregate they appear to be. This issue is a non-starter because the only way to ensure all races get the same interest rate is to do away with the credit reporting system auto dealers rely on--which is an entirely different conversation.

People are not equal in action or effect. They do have equal votes, though, and that is why this kind of pandering is so common. A better solution would be an individualism/responsibility enema imposed on all whining minorities. American greatness is the result of great individuals seeking to be anything but equal.