Honda captive may face loan-bias penalty

American Honda Finance Corp. disclosed that the Consumer Financial Protection Bureau and U.S. Department of Justice have concluded the company was responsible for illegal discrimination in pricing auto loans and could be disciplined unless it reaches a settlement with the federal agencies.

The disclosure, in a Securities and Exchange Commission filing, echoes a nearly identical move by Toyota Motor Credit Corp. on Nov. 28. Both captive finance companies disclosed last year that the federal agencies had requested information regarding auto loans.

"AHFC has now received a notice that the Agencies have authorized enforcement actions against AHFC, alleging discrimination in automobile loan pricing to certain borrowers by dealers and alleging the loan pricing disparities were caused by AHFC's business practices related to dealers," Honda Finance said in a filing.

"AHFC has also been informed that the Agencies may defer pursuit of this litigation if AHFC works with the Agencies to seek a voluntary resolution to these allegations," the filing said.

Honda Finance said the federal agencies are seeking monetary relief for customers, and changes in the company's pricing policies.

The CFPB last year said auto lenders were responsible for higher rates for dealer reserve for legally protected classes of borrowers such as minorities and women.