The WSJ reports on the latest
coup from Obama Administration--thanks to Dodd-Frank;
A federal regulator’s campaign to fight bias against minorities is
changing the way many car loans are priced. Those efforts could mean
some consumers will pay more.
The Consumer Financial Protection Bureau has reached more than $200
million in antidiscrimination agreements since 2013 with several large
car-financing companies, including Ally Financial Inc.
and American Honda Finance Corp., over allegations that dealers
charged higher interest rates for African-Americans, Hispanics and other
minority buyers.
The CFPB was specifically prohibited from interfering in the car lending business, but
where there's a will.... All that the Bureau has accomplished is to change the way different components of an auto loan are structured. Apparently eliminating the most efficient--competitively arrived at--method for lenders and auto dealerships. So, with a less efficient process...surprise!
As part of its settlement with the CFPB and Justice Department,
Honda’s lending unit agreed to lower its maximum dealer-markup cap to
1.25 percentage points from 2.25 points. But it has also decided to pay
dealers 1% of the loan value out of its own pocket, while also raising
the wholesale rate for car loans.
Under Honda’s new pricing plan,
borrowers with a relatively high credit score of 760 or above would pay
a wholesale rate of at least 3.4% for a new car loan, up from 2.3%
before the settlement, according to a pricing sheet distributed by Honda
to dealers in Texas and reviewed by The Wall Street Journal. Add in a
dealer markup of 0.5 percentage point, for example, and the borrower
could end up with an annual percentage rate of 3.9%, compared with 2.8%
before. Over the life of a four-year $25,000 loan, that would add $586
in interest payments.
Hey, to the CFPB mafia, it's
other people's money.
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