News Column

The Post and Courier, Charleston, S.C., David Slade column

February 2, 2014

By David Slade, The Post and Courier, Charleston, S.C.

Feb. 02 --Are you the right race to get a good car loan, or a mortgage? That's an offensive question, of course. Green is the only color that should matter when it comes to getting a loan, but it's been shown time and again that people of color don't always receive equal treatment. In late December PNC bank agreed to pay $35 million in restitution to settle a joint Consumer Financial Protection Bureau and the Department of Justice complaint against National City Bank , which PNC acquired in 2008. The complaint alleged that from 2002 to 2008, National City charged over 76,000 black and Hispanic borrowers higher loan rates than white borrowers with similar creditworthiness. Also in December the CFPB and DOJ ordered Ally Bank to create an $80 million fund to compensate nonwhite car buyers, who were charged higher interest rates on car loans. The higher rates cost the nonwhite buyers an extra $200 to $300 over their loan terms. In both cases, the consumer protection folks found that the discriminatory rate-setting stemmed from lender policies that gave loan brokers and car dealers discretion to mark up rates, and financial incentives to do so. And those with the discretion allegedly abused it, in biased ways. Those are just some of the most recent cases. And we're not talking about small mom-and-pop business. These are some of the nation's largest lenders. In 2012 the DOJ reached a $175 million settlement with Wells Fargo over claims that the nation's largest home mortgage originator had "engaged in a pattern or practice of discrimination" against black and hispanic borrowers from 2004 through 2009. The same year, DOJ reached a $21 million settlement with SunTrust Mortgage over similar complaints. In 2011 the feds reached a $335 million settlement with Countrywide Financial to settle claims that - you guessed it -- the lender charged higher mortgage rates to black and Latino borrowers, and also steered thousands into sub-prime loans while white borrowers with similar credit received prime loans. Those cases are some of the largest ones, but the list of complaints and settlements just goes on, and on, and on. So, what can you do, to make sure the loan rate you are offered is as good as it should be, based on your credit? There are some common-sense steps, and they are things all potential borrowers should do. Educate yourself about loan terms and interest rates. If you don't know what to expect, how would you know if you're offered a bad deal? If you're buying a house or a car, there are plenty of places to get a loan, and you don't have to accept what you're offered. Comparison shop. You should be able to find out what the best available interest rates are without filling out an application, just by looking at lenders' websites (they always show the lowest rates, for which not everyone will qualify), and websites such as that can show rates multiple lenders are offering. One thing you may find is a better place to get the loan you're looking for. It's truly surprising how widely rates can vary from one lender to another. Understand what you look like to the lender. Not your race, or gender, but what you look like on paper in terms of creditworthiness. If you don't know your credit score, or what your credit report looks like, you'll be at a disadvantage when you go loan-shopping. The good news is, under federal law you can review your credit reports at no cost once a year at or by calling 877-322-8228. The credit reports are free, but you'll have to pay a small fee to get your credit score. Once you've reviewed your credit reports, and you know your credit score, you should have a good idea about whether you're going to be considered a person with excellent, good, fair or poor creditworthiness. Consider that financing is part of the cost. If you're making a large purchase and you're going to finance it with a loan, understand that the loan terms are just as important -- often more important -- than the price you agree to pay. In one of those lawsuits I cited earlier, some borrowers ended up paying hundreds more for their cars because their loan interest rates were several tenths of a percent higher than they should have been. So, even a tenth of one percent (10 basis points) on a loan interest rate can add up to real money over a long term. Unfortunately, even in the 21st Century, the evidence is clear that while all borrowers need to do their homework, people of color have good reason to be extra diligent. Reach David Slade at 937-5552, or ___ (c)2014 The Post and Courier (Charleston, S.C.) Visit The Post and Courier (Charleston, S.C.) at Distributed by MCT Information Services

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Source: Post & Courier (Charleston, SC)

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