LOS ANGELES (CBSLA.com) — A settlement resolving allegations that Torrance-based Toyota Motor Credit Corp. discriminated against black and Asian/Pacific Islander borrowers in auto lending was announced Tuesday by the Justice Department and the Consumer Financial Protection Bureau.
Through the settlement, filed in Los Angeles federal court, Toyota agreed to limit the discretion of its dealers to charge interest rate markups on Toyota loans. The company also agreed that it will not increase the interest rates it quotes to car dealers in order to fund additional non-discretionary dealer compensation.
The settlement provides about $20 million in compensation for borrowers who took out loans between January 2011 and last month and paid higher markups based on the alleged discrimination.
Toyota will also pay up to $2 million to black and Asian/Pacific Islander borrowers with markup disparities while Toyota is preparing to implement the new policies, which must be in place by August.
The company said in a statement that while it disagrees with the agencies’ “methodologies,” Toyota is committed to fairness.
“TMCC does not tolerate discrimination of any kind, even perceived or unintentional, from its employees or business partners — this principle extends to fair lending practices,” according to the company.
The lawsuit alleged that Toyota charged borrowers higher interest rates because of their race or national origin, and not because of creditworthiness or other objective criteria related to borrower risk, with the average African-American borrower paying more than $200 more during the term of a loan, and the average Asian/Pacific Islander borrower paying more than $100 over the term of a loan.
The Equal Credit Opportunity Act prohibits such discrimination in all forms of lending, including auto lending.
Toyota is the nation’s largest captive auto lender, and the fifth-largest auto lender overall.
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