Ally Financial Inc. Friday agreed to pay $98 million to settle claims of discriminatory auto loans to African-American, Hispanic and Asian/Pacific borrowers.
The settlement with Ally Financial Inc. and Ally Bank was jointly announced by the U.S. Justice Department and the Consumer Financial Protection Bureau in Washington. Ally, based in Detroit, was formerly known as General Motors Acceptance Corp., before GM's 2009 bankruptcy.
About 235,000 victims of past auto loan discrimination since April 1, 2011 will share $80 million in compensation and Ally will pay $18 million to the consumer protection board 's Civil Penalty Fund.
"With this largest-ever settlement in an auto loan discrimination case, we are taking a firm stand against discrimination in a critical lending market," said U.S. Attorney General Eric Holder in a Justice Department statement.
Ally agreed to refund all overcharges resulting from discriminatory high-interest rate loans to minority borrowers for the next three years.
The Justice Department said the average victim paid $200 to $300 more for a loan regardless of creditworthiness.
"Too many consumers have had to pay more for their auto loans simply because of their race or other characteristics protected under the law," said Richard Cordray, director of the Consumer Financial Protection Bureau. "Too often, these consumers do not know they are paying more or are simply unable to get recourse."
The settlement is subject to approval of the U.S. District Court for the Eastern District of Michigan.
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Original headline: Ally Financial to pay $98 million for auto loan discrimination
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