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Financial Services Law Insights and Observations

DOJ settles with Maryland car dealership for ECOA violations

Federal Issues DOJ ECOA Auto Finance Fair Lending Enforcement

Federal Issues

On July 2, the DOJ announced a settlement with a Maryland used car dealership and its owner and manager (collectively, “defendants”) resolving allegations that the defendants violated ECOA by offering terms of credit based on race to consumers seeking to purchase and finance used cars. As previously covered by InfoBytes, in September 2019, the DOJ announced it filed a lawsuit in the U.S. District Court for the District of Maryland alleging that between September 2017 and April 2018, compliance testing done by the DOJ concluded that the defendants’ “actions, policies, and practices discriminate against applicants on the basis of race with respect to credit transactions. . .by offering more favorable terms to white testers than to African American testers with similar credit characteristics.” Specifically, the complaint alleged that African American testers were, among other things, (i) told they needed higher down payment amounts than white testers for the same car; (ii) quoted higher bi-weekly payments for “buy here, pay here” financing than white testers for the same car; and (iii) not offered to fund down payments in two installments, as compared to white testers.  

The consent order, which is subject to court approval and does not assess a monetary penalty, requires the dealership to, among other things, (i) develop written policies designed to prevent discrimination and ensure compliance with ECOA, including standardizing procedures for all credit applicants to reduce individual discretion in determining terms and conditions of credit; (ii) post and display a non-discrimination notice; (iii) attend ECOA training; and (iv) engage in on-going compliance monitoring and recordkeeping and reporting requirements with the DOJ.

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