By Alan Zibel
WASHINGTON--U.S. authorities are poised to charge the lending
arm of Honda Motor Co. with discriminatory loan practices, the
company disclosed Tuesday, as part of a broad federal inquiry into
whether auto lenders charge higher interest rates to
minorities.
America Honda Finance Corp., the lending arm of the Japanese
auto maker, said in a regulatory filing Tuesday it was notified
last month that federal officials are prepared to proceed with an
enforcement action against the company.
The Consumer Financial Protection Bureau and Justice Department
"have indicated that they are seeking monetary relief and
implementation of changes to our discretionary pricing practices
and policies," Honda said in the filing. The company said it has
cooperated with the investigation and wishes to achieve "a mutually
satisfactory resolution." A company spokesman declined further
comment.
The CFPB and the Justice Department are investigating whether
auto dealers and lenders are raising the cost of car loans to
minorities through extra interest-rate charges. Ally Financial Inc.
agreed last year to a $98 million settlement as part of the
government's probe, and didn't admit or deny the allegations.
A CFPB spokesman declined to comment Tuesday, and
representatives of Honda couldn't immediately be reached for
comment.
The disclosure follows a similar filing last week by Toyota
Motor Co. A Toyota spokesman said in a statement that the company
intends to work out a solution "that meets the CFPB's expectations
and allows us to better serve our customers."
Over the past 18 months, officials at the CPFB have been probing
a type of financing arranged by auto dealers, who typically
originate loans for consumers on behalf of banks or other lenders,
a practice called "indirect" auto lending.
Dealers are able to add extra interest-rate charges to consumers
as compensation for setting up the loan. Federal officials say the
system provides a financial incentive for dealers to charge higher
rates and increases the risk of discrimination.
The CFPB, however, has faced questions from lawmakers who say
the agency hasn't provided enough detail about its concerns to
justify the probe. Auto dealers aren't subject to the CFPB's
oversight under an exemption included in the 2010 Dodd-Frank
financial law, but CFPB officials have the power to oversee
lenders.
Write to Alan Zibel at alan.zibel@wsj.com
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