Ally Pays $98 Million To Settle Racial-Bias Lending Probe: Will This Simplify Your Next Auto Loan?
(Car Connection) The Consumer Financial Protection Bureau recently investigated auto lender Ally Financial amid concerns that the company regularly charged higher interest rates to non-white borrowers.
According to AutoNews, Ally has now agreed to cough up $98 million to settle the probe. Could this make things easier — or at least more transparent — for loan recipients down the line?
When shoppers secure car loans through dealerships, dealers attempt to match those shoppers with low-interest loans, based on the shoppers' credit history and other factors. But like all middlemen, dealers need to make something in exchange for their work, and so, they charge what's know as the "dealer reserve" — a markup of about 2.0 or 2.5 percentage points on the loan, which the dealers can pocket as profit.