The CFPB and U.S. Department of Justice are reportedly investigating the lending operations of some of America’s largest auto manufacturers for potential discriminatory lending practices.
Regulators have sent Toyota Motor Credit Corp., American Honda Finance Corp. and up to five other major auto manufacturers have received requests from the CFPB and DoJ for information related to pricing practices and data potentially related to borrowers’ racial backgrounds, Bloomberg reports.
The CFPB and DoJ have sought information related to the “dealer markup,” which is also referred to by auto dealers as “dealer participation” or “dealer-assisted finance,” where lenders allow dealers to add to the offered interest rate and pocket the difference.
In March, the CFPB cautioned supervised entities that they would face enforcement action if they were found to participate in discriminatory practices, which drew criticism from auto dealers, according to Bloomberg.
The watchdog agency also said last year that it would apply “disparate impact” to consumer financial products—a doctrine that states that lenders can face retribution for actions that have a discriminatory effect, even if they did not intend to engage in the action.
In order to make the determination, the CFPB needs information on borrowers’ rates and interest rates, leading the agency to seek large amounts of data from lenders last year. Some began providing that information in June, Bloomberg reports.