BANKS OVER CHARGING ON AUTO LOANS#

A federal consumer regulator said on Thurday some lenders offering auto loans through auto dealerships charge minorities above-market interest rates and warned it will crack down on a profit-sharing practice between used and new car dealers and lending institutions. The Consumer Financial Protection Bureau said a typical industry practice known as "dealer markup" -in which a lender and a used or new car dealer split interest-rate charges-may lead to lending discrimination. The regulator said its examination of the industry shows that some lender policies allows markups of interest rates, and that there is a "significant risk" the practice results in higher interest rates for African-Americans and Hispanics. The CFPB would force auto lenders "into changing the way they compensate dealers without any indication that the bureau has examined the effect this change could have on the cost of credit for consumers". The agency failed to address the fact that high risk consumers often times require the cardealer to in fact co-sign or guarantee the loan. If the consumer defaults on the car loan the dealership is liable to the bank to payoff the debt. The credit scoring system often requires consumers with marginal or low credit scores to pay higher interest rates.