Regulators signaled that they hoped other captive-finance arms would follow Honda Finance's lead. "We hope that Honda's leadership will spur the rest of the industry to constrain dealer markup to address discriminatory pricing," Gupta said. But that remains to be seen.
Spokesmen for the finance arms of Toyota and Nissan, which the government is also investigating for discriminatory auto lending, would not disclose whether they currently cap dealer reserve and, if so, what the caps are.
Late last month, American Banker reported that the CFPB was planning to cite the finance arms of Honda, Toyota and Nissan for discriminatory auto lending.
In response, Toyota Financial told Automotive News at the time that it "currently has no plans to change our pricing model."
"We look forward to continuing to work with [regulators] in pursuit of an outcome that serves the best interests of consumers while preserving auto finance providers' ability to compete," the company said then.
Nissan Motor Acceptance said at the time that discussions with the CFPB were "exploratory" as it aims to "protect our customers' ability to choose financing options that fit their specific needs and to negotiate the best rates possible."
In its settlement, Honda Finance also agreed to pay $24 million to consumers nationwide allegedly harmed by auto-lending discrimination and $1 million into a fund to promote consumer financial education.
Although Honda Finance agreed to the settlement, the lender admitted no wrongdoing, saying that its lending practices have been "fair and transparent."
Honda Finance "has a difference of opinion with the CFPB and the DOJ regarding the methodology used to make determinations about lending practices, but we nonetheless share a fundamental agreement in the importance of fair lending," the lender said.
The settlement requires Honda to improve its monitoring and compliance systems. It also "allows the lender to experiment with different approaches toward lessening discrimination and requires it to regularly report to the department and the CFPB on the results of its efforts," the federal agencies said.
But Brad Hoffman, chairman of the American International Automobile Dealers Association, said in a statement: "There's no getting around the fact that this enforcement action is going to reduce the savings consumers depend on when financing a new vehicle."
In the same statement, Bill Fox, chairman of the National Automobile Dealers Association, said the order will "hamstring" consumers' ability to negotiate lower interest rates on their auto loans.
On the other hand, Kenneth Rojc, managing partner of the auto-finance group at Chicago law firm Nisen & Elliott, noted that the Justice Department and CFPB did not force Honda to switch to a flat fee for auto loans. As a result, he predicted, dealer reserve "is here to stay."