A white man and a black woman both go to buy a car. They have similar credit histories, and are purchasing the same type of vehicle from the same place. Common sense says they should be charged the same interest rate, right?
Well, common sense is missing from the auto market today.
There is solid evidence
that black, Latino, and Asian-American car buyers are charged higher interest rates than white Americans with similar credit histories. Instead of putting a stop to it, Republicans in the House of Representatives are going the extra mile to allow car dealers to discriminate. Most disappointingly, they are being aided and abetted by far too many Democrats.
In the 1990s, lawsuits
documented hidden kickbacks that rewarded dealers for marking up the interest rate on many of the loans they arranged for car buyers. This practice consistently
led to higher rates for African-American and Latino borrowers, more than for white borrowers with similar credit. Because the higher cost is hidden in the interest rate, this discriminatory lending leads to some consumers paying hundreds or thousands more -- without even knowing.
In fact, the Consumer Financial Protection Bureau estimates
the total cost to society in the tens of millions. That is one reason why the agency stepped in to recommend that banks abandon the sales model that gave dealerships so much control over interest rates. The Department of Justice and the Consumer Financial Protection Bureau also reached settlements with Ally Bank, Honda Finance, and Fifth Third Bank, which have agreed to pay $140 million including returning millions to overcharged consumers.
So companies lie and cheat, the cops on the beat step in, and consumers get their money back. Sounds like government at its best to me.
But for lots of folks in Washington, anything that hurts Wall Street banks' unbridled addiction is bad news. In late November, the U.S. House of Representatives passed a bill calling on federal regulators and prosecutors to back off and essentially ignore the problem of discriminatory auto lending.
Progressives champions like Americans for Financial Reform, the NAACP, the Urban League, the National Council of La Raza, and the Congressional Progressive Caucus all opposed the bill. So did the National Association of Minority Auto Dealers, a key trade group. But hundreds of Republicans supported
it, as well as 88 Democrats, including the head of the Democratic National Committee, Debbie Wasserman-Schultz.
Make no mistake, a vote in favor was a vote to allow businesses to charge higher rates to minorities. In 2015, that is unacceptable, especially from the Democratic Party and its supposed standard-bearer.
I realize that car dealerships are in every district and thus have oversized clout. But minority communities are still in crisis. Millions lost massive wealth in the economic crash after being steered into higher-cost mortgages. Congress banned kickbacks in the mortgage market, why not do the same for the second biggest family purchase?
Worst of all, this bill could make it far easier for businesses of all types to discriminate. The core of the argument in favor is that it is not enough for policies to have a disparate impact; they must be deliberately racist. In other words, the Justice Department should not be looking to see whether practices are resulting in higher rates for some communities, they must instead find some auto dealer willing to raise his hand and declare himself a racist.
Instead of changing the standard, we should continue the approach that has been used since anti-discrimination laws were first enacted approximately 50 years ago; after all, even this conservative Supreme Court affirmed
the use of disparate impact in a housing discrimination case this summer.
By a 3 to 1 margin, according to one recent poll
, the public strongly supports action to crack down on discriminatory auto lending practices. But not only did a bill in favor of discrimination pass the House, it will also quite possibly be included in an end of year compromise package.
Out in America, people oppose discrimination by overwhelming margins. In the halls of Congress, a bipartisan group voted in favor of it. The next time the intense voter anger and lack of enthusiasm flummoxes those Republicans and Democrats, I suggest they should look in the mirror.