Lobbying by auto dealer industry promotes discriminatory lending practices, forum says
Car buyers of color in New York and Connecticut say auto dealerships have lobbied in their states have allow for unfair lending practices and discrimination. Lawmakers and advocates rallied for reforms in each state during a forum Wednesday.
Deborah Caviness, founder of the Southern Connecticut Black Chamber of Commerce, said auto dealerships have a bias against her race and gender when she shops for cars.
“Being a woman, and being a woman of color, I’m sure that contributed to the salesman's aggressive negotiating style and tactic, which I found kind of amusing,” Caviness said. “When he didn't get the reaction he wanted, that's when the shenanigans started.”
Caviness said she was pressured to take a deal with a higher total loan and interest rates. She ended up going to a different dealership — unable to purchase the car she had wanted.
Ian Ayres is a Yale professor who has studied how bias at car dealerships circumvents federal law, like the Dodd-Frank Act and the creation of the Consumer Financial Protection Bureau in 2010. They said there are still systemic issues in the industry.
“This is happening in New York right now,” Ayres said. “In 2020, Bronx Honda’s general manager told salespeople to target African American and Hispanic customers with higher interest rate markups and transaction fees.”
“African Americans were only 9% of GMAC customers, but they were 19% of those customers paying GMAC more than $1,000 profits on car loans,” Ayres said.
Chuck Bell, programs director at Consumer Reports, said direct, bargain-free car sale models, such as Tesla and Carvana, could begin to level the playing field. “A disruptive business model, like direct sales, could be of great benefit to consumers,” Bell said.
Connecticut state Representative Quentin Williams, a Democrat, called for more transparency from auto dealers and financial literacy training for vehicle buyers.
“Oftentimes we try to have a solution that is either consumer based or retail based,” Williams said. “This is a solution that needs to be about both. We need to have more consumer protection and more consumer information, making sure that they understand the process, making sure that we put financial literacy opportunities in our communities.”
Democratic state Representative Christopher Rosario wants Connecticut to pass laws that provide more oversight and control over loan interest rates.
“Right now it's legal for an auto dealer to give a different interest rate to a person of color and to a white person with the same credit score,” Rosario said. “This should be illegal in our state and every other state. No states that I’m aware of have effectively stopped discrimination, but a few states have placed a cap on lending rate markups. This definitely would be a good place to start here in Connecticut.”