Although there has been a series of similar class-action lawsuits against lenders, the Primus case is the first to go to trial.
Other financial institutions have settled litigation by agreeing to limit markups from wholesale loan rates, but not eliminate them. Recent state laws also cap markups rather than forbid the practice.
"The judge is ratcheting up the pressure for some kind of settlement," says Kenneth Rojc, a Chicago attorney who represents auto finance companies.
"This represents a significant departure from the current trend in court settlements and legislation."
Primus of Franklin, Tenn., allows the dealerships through which it provides consumer loans to mark up rates on those loans. In March, Trauger ruled that the practice leads to higher finance charges for minority buyers than for similarly situated white customers.
At the time, the judge stopped short of ordering a specific remedy. Instead, she urged Primus and the plaintiffs to work out a compromise.
"Any remedy you negotiate is probably going to be better for Primus than what I will order," Trauger said. "I'll be very plain with you. I'm having a real hard time understanding why the defense cannot negotiate a remedy."
When the parties failed to reach a voluntary settlement, Trauger sent the case to mediation. That process is scheduled to begin July 19.
Edward Infante, a retired federal judge from California, will be the mediator. Infante has helped automotive finance companies resolve similar racial bias cases.