HARRISBURG – Two Philadelphia car dealerships entered into a $55,000 settlement agreement with the Attorney General’s Civil Rights Enforcement Section for allegedly using discriminatory lending practices against African-American customers.
Attorney General Tom Corbett said the agreement was reached with Springfield Ford in Springfield, and Pacifico Ford in Philadelphia. The agreement resolves claims that the two car dealerships violated the Consumer Protection Law and the Pennsylvania Human Relations Commission Act.
Corbett said that between the years of 1999 and 2002, and potentially between 2003 and 2005, Springfield Ford and Pacifico Ford allegedly set higher markups or dealer reserves for loans made to African-American customers.
According to the investigation, car dealerships accept loan applications and submit them to one or more lenders. If the loan is accepted, a dealership receives a “buy rate,” or the percentage rate at which the lender agrees to obtain a contract from the dealership.
Corbett said a dealership may add a finance charge to the buy rate, known as an “interest rate markup,” and then passes on the total to the consumer as the Annual Percentage Rate.
From 1999 to 2005, Springfield Ford and Pacifico Ford were not required to and did not have any written guidelines or procedures for setting dealer reserves, but gave their managers discretion to set dealer reserves within the parameters of Ford, lender requirements, and the consumer’s negotiation demands.
Corbett said the markups passed on to African-American buyers were higher than those passed on to similarly situated white consumers.
Corbett alleged that up to 244 customers were affected at Springfield Ford and up to 948 customers from Pacifico Ford were affected by the discriminatory lending.
According to the Assurance of Voluntary Compliance, both car dealerships have agreed to pay the Commonwealth of Pennsylvania up to $55,000, with Springfield Ford paying up to $15,000 and Pacifico Ford paying up to $40,000, for future public protection purposes.
Corbett said this case is a companion to a case settled by the United States Department of Justice against Springfield Ford and Pacifico Ford for violations of the Federal Equal Credit Opportunity Act.
Under the agreement with the Justice Department, Pacifico Ford will pay up to $363,166, and Springfield Ford will pay up to $94,565, plus interest, to African-American consumers who were charged higher interest rates.
In addition, Pacifico Ford and Springfield Ford have agreed to change the way they set markups to prevent discrimination. The dealerships will follow the same procedures for setting markups for all customers, and only good faith, competitive factors consistent with ECOA will influence that process. Both dealerships will also provide enhanced equal credit opportunity training to its officers and employees who set rates for automobile loans.
Pennsylvania’s settlement was negotiated by Chief Deputy Attorney General Harold Dunbar from the Civil Rights Enforcement Section and Executive Deputy Attorney General Alexis Barbieri from the Public Protection Division.