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July 29, 2004

The Cohen Report

Here is where the power of the blogosphere comes into action. I've heard the rumors now I've got my hands on some facts from PR Newswire:

Today, in response to a new report on discriminatory auto loan markups by American Honda Finance Corporation, the Consumer Federation of America calls on Honda and its dealers to end undisclosed lending practices that discriminate against African-American car buyers. "In response to litigation and public pressure, other auto loan companies are beginning to curb discriminatory auto loan practices, and Honda should do the same," said CFA Executive Director Stephen Brobeck.

The report, prepared by Dr. Mark Cohen of Vanderbilt University, is based on examination of records of 383,652 AHFC customers over the period, June 1999 to April 2003. It concludes that African-American borrowers consistently paid higher "finance markup charges" over average than white customers when they finance their cars at dealerships through AHFC. The study controlled for factors such as term of loan, type of vehicle, creditworthiness of borrower, and geographic area.

Auto loan markups occur when lenders allow car dealers to mark up auto loans above the "buy rate" reflecting the actual creditworthiness of borrowers. A growing body of evidence reveals that hundreds of thousands of consumers, perhaps millions, have trusted auto finance companies and car dealers to charge them fair and reasonable rates only to then be subjected to markups that, in the past, have often exceeded five percentage points. A report, which was released by CFA, the National Council of La Raza, and the Rainbow-PUSH Coalition early this year, estimated that these overcharges cost consumers at least $1 billion annually.

This is something we can all jump on, and quite frankly I hope the Jesse squawks. I happen to know an official at Toyota and she tells me that when Jesse says jump, American Toyota oils up the pogo stick.

On the personal note, even though I clock big figures, my FICO score is somewhere around 3 out of a possible 1000, due to my back tax issues. Nevertheless I have had fairly decent relations with Ford Motor Credit, GMAC, Volkswagen Credit and some other third rate finance company. I know I've had my stuff marked up, and I know exactly when the dealer is doing it, but I really don't complain because I actually do have lousy credit. Besides, I don't buy new cars. The way I see it, depreciation is a bigger ripoff than credit markups. Nevertheless, I see this as a big issue and I do want to get a sense of blackfolks experiences with credit departments.

On the whole, Ford Motor Credit was best with us. We got the best rates and service from them.

Here's the report.
Download file

It's important to understand that what's going on here is not directly Honda's fault. Honda dealers are the ones who have the discretion to make these markups. They are both biased in doing so and exceeding the limits recommended by Honda. So there are names that can be named and dealerships that can be identified in this scam. Still, it is Honda's responsibility. They hand pick their dealers. Dealer Associations should also crack down, they will ultimately pay the price.

I'm interested to know how much black radio will get involved in this matter. They should start seeing some conciliatory advertising dollars. At least if I was a black radio station manager I would be using this discovery to my advantage.

Posted by mbowen at July 29, 2004 12:57 PM

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Comments

Posted by: DarkStar at July 29, 2004 06:36 PM

Posted by: True_Liberal at July 31, 2004 09:30 AM