Scrutiny continues

Some dealers are giddy with the prospect of a defanged Consumer Financial Protection Bureau under a Trump administration-appointed director. They apparently think the days of close scrutiny of automotive lending practices are over.

Not so fast.

Auto lending and dealerships' role in arranging those loans are still being scrutinized, just by other players.

Last week, Automotive News published an article on autonews.com about a report from the National Fair Housing Alliance alleging racial discrimination in auto financing arranged by dealerships.

The report has its flaws. The sample size and geographic spread was almost laughably tiny: just eight dealerships, all in eastern Virginia. But the report's co-author said it wasn't a study; it was an "undercover investigation." Think "60 Minutes" or what your local TV station's investigative team might do with hidden cameras.

Don't publish?

Some readers think Automotive News should not have published the story because of those flaws. But frankly, I thought this report was much better than some I've seen alleging discriminatory lending. When the authors sent white and nonwhite folks to dealerships to look at a car and apply for a loan, they were of the same age and gender. The report's authors also made sure the pairs were similar in qualifying for military or recent-graduate discounts. The pairs stuck to the same script.

Heck, they even went early in the month to make sure one of them wasn't offered an unbelievable deal to help the dealership meet its stair-step quota at month end. Does that rule out the chance that the automaker offered one incentive on Monday and raised it on Tuesday? No. But at least the investigation tried to mitigate that possibility.

Bottom line: More often than not, the nonwhite customer, with a better credit score and either a higher income or better debt-to-income ratio, received more expensive financing than the white customer.

Maybe that was due to some factor other than race. Or maybe race really was the difference. If so, that shouldn't happen.

Reminder

Even if you dispute the report's methodology, I believe dealers and dealership personnel need to be reminded that groups such as the National Fair Housing Alliance -- not to mention state attorneys general -- are still putting indirect lending practices under the microscope.

The only way to prevent national reports such as this one, or ones by your local TV station or newspaper, from damaging dealerships' reputation is to make sure there is nothing to report.

"Dealer behaves badly" is a headline. "Dealer treats all customers fairly" isn't.

You are being watched.

News Editor James B. Treece oversees Automotive News' coverage of auto retailing.

You can reach James B. Treece at jtreece@crain.com

ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.


Email Newsletters
  • General newsletters
  • (Weekdays)
  • (Mondays)
  • (As needed)
  • Video newscasts
  • (Weekdays)
  • (Weekdays)
  • (Saturdays)
  • Special interest newsletters
  • (Thursdays)
  • (Tuesdays)
  • (Monthly)
  • (Monthly)
  • (Wednesdays)
  • (Bimonthly)
  • Special reports
  • (As needed)
  • (As needed)
  • Communication preferences
  • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.