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Financial Services Law Insights and Observations

NYDFS announces fair lending settlements with indirect auto lenders

State Issues NYDFS Enforcement Fair Lending Auto Finance

State Issues

On June 29, NYDFS announced settlements with two New York banks to resolve allegations that the banks violated New York Executive Law § 296-a while engaged in indirect automobile lending. NYDFS alleged that the banks’ practices resulted in members of protected classes paying higher interest rates that were not based on creditworthiness. According to NYDFS, the banks failed to monitor “dealers that were charging members of protected classes, namely race and ethnicity, more in discretionary Dealer Markups than borrowers identified as non-Hispanic White.”

Under the terms of the first consent order, the bank—which had voluntarily discontinued its indirect auto lending program in November 2017—agreed to pay a $275,000 civil money penalty, provide restitution to eligible impacted borrowers, and make a $50,000 contribution to local community development organizations. The second bank agreed to “move to a flat-fee business model in connection with indirect auto lending,” provide restitution to impacted borrowers, and undertake fair lending compliance remediation efforts to increase its monitoring of dealers participating in its indirect auto lending program. The consent order also requires the payment of a $350,000 civil money penalty.

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