Digital financial analysis eliminates prejudice


In a time when discrimination and racism are a focal point in our nation, it’s important to look back on financial discrimination in auto lending and forward on how we can do better as an industry.

In 2013, Ally Financial paid out $98 million to settle a suit claiming they discriminate by charging minorities higher interest rates for having the same creditworthiness. The minority borrowers paid $200-$300 more over the life of their loan.

In 2015, American Honda Finance Corp paid out $24 million to settle a very similar discrimination suit where dealers were using the max adjustable margin unfairly against minorities. This settlement required Honda to pull back the dealer adjustable margin from 2.25% to a maximum of just 1.25%. This suit showed that minorities paid $250 more over the life of their loan.  

In 2018, a small study in Washington D.C. showed that 62.5% of higher qualified non-whites were offered more expensive terms than the less-qualified white buyers in the study.

How can you help your dealer clients protect themselves from discriminatory lending practices?

Start by offering them a data-first process that strips away any human-based prejudice and allows all qualified buyers to get the same initial finance offers. Then, provide a consistent and transparent means of presenting the monthly payment for the selected vehicle, including all fees and add-on product sales.

Our channel partners and banks are enjoying the speed, accuracy, and anonymity of digital retailing. The built-in self-service credit applications allow the F&I department to provide multiple loan approvals for the customers to choose from, all of which include the usual finance reserve that each bank has established with the dealership. The client gets a choice and the dealership is protected from any prejudice issues while maintaining their F&I margin.

If you are interested in learning more about how our platform can help your business help dealers provide a prejudice-free, touchless online sales and credit process, reach out to us at – sales@creditiq.com

Bill Gerhard
Author: Bill Gerhard

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