CINCINNATI (AP) – Regional banker Fifth Third Bancorp has agreed to an $18 million settlement on allegations that black and Hispanic borrowers had to pay higher auto loan rates, federal authorities said Monday.
The settlement requires compensation for borrowers who were overcharged and requires changes and monitoring of the way Fifth Third prices what are called “indirect” auto loans originated by dealers. Federal officials said Fifth Third’s practices allowed rate markups that weren’t based on creditworthiness or other objective borrower risk assessment.
“The higher markups that Fifth Third charged to African-American and Hispanic borrowers are a result of Fifth Third’s policy and practice of allowing dealers to mark up a consumer’s interest rate above Fifth Third’s established buy rate and then compensating dealers from that increased interest revenue,” the federal complaint stated. It said Fifth Third didn’t provide adequate constraints or monitoring to prevent discrimination.
As a result, the federal complaint alleged, thousands of black and Hispanic borrowers since 2010 have had higher rates that obliged them to pay, on average, around $200 more over the life of their loans than white non-Hispanic borrowers did.
In the federal consent decree, subject to a judge’s approval, Fifth Third asserted that it has “treated all of its customers fairly and without regard to race or national origin” and wanted to avoid potentially lengthy litigation.
The company released a statement Monday saying it “strongly opposes any type of discrimination” and said the loans in question weren’t made directly by Fifth Third.
“When considering whether to purchase a contract from a dealer, Fifth Third does not receive or consider any information about a consumer’s race or ethnicity,” the company said in its statement.
The settlement was announced by the Justice Department and Consumer Financial Protection Bureau.
Fifth Third has nearly 1,300 banking centers in 12 states: Ohio, Kentucky, Illinois, Indiana, Michigan, Missouri, Florida, Georgia, North Carolina, Tennessee, Pennsylvania and West Virginia.
(Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)