Honda settles discrimination claims

LOS ANGELES – Honda reached a settlement Tuesday to resolve allegations that the company discriminated against minority car buyers by marking up interest rates on loans, a practice industry experts describe as common because of the discretion given to individual dealerships.

Honda’s settlement with the U.S. Department of Justice, which is subject to court approval, was filed in federal court in Los Angeles. Honda’s U.S. operation is based in nearby Torrance, California.

The Justice Department and the Consumer Financial Protection Bureau accused Honda dealers of charging higher interest rates to thousands of black, Hispanic, Asian and Pacific Islander customers than white car buyers. Those minority customers paid an average of between $150 and $250 more during the terms of their loans, the Justice Department said.

Honda said in a statement that it “strongly opposes any form of discrimination, and we expect our dealers to uphold this principle, as well.”

“We firmly believe that our lending practices have been fair and transparent,” the company said.

Under the settlement, Honda is agreeing to pay $24 million to past victims of discriminatory lending and cap the interest-rate markups that dealers can charge to between 1 and 1.25 percentage points, depending on the length of the loan.

The Justice Department called the settlement groundbreaking, specifically referring to the markup caps.

“We believe that Honda’s new compensation system balances fair compensation for dealers and fair lending for consumers,” said Vanita Gupta, head of the Justice Department’s civil rights division. “We hope that Honda’s leadership will spur the rest of the industry to constrain dealer markup to address discriminatory pricing.”