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CFPB: Consumers Will Soon Receive Ally Payout

WASHINGTON — The Consumer Financial Protection Bureau (CFPB) released details last week about plans to reimburse consumers allegedly harmed by Ally Financial’s auto lending practices. The announcement comes a year and half after the regulator, together with the Department of Justice, reached a $98 million settlement with Ally — $80 million of which was earmarked to compensate victims of the finance source’s alleged discriminatory practices.

“We found that Ally had a policy of giving dealers the discretion to increase or ‘mark up’ consumers’ interest rates, and paying dealers for those markups,” Patrice Ficklin, the CFPB’s assistant director of Fair Lending and Equal Opportunity, explained in the June 15 blog post. “We found that between April 2011 and December 2013, Ally’s markup policy resulted in African-American, Hispanic, Asian and Pacific Islander borrowers paying more for auto loans than similarly situated non-Hispanic white borrowers.”

Ficklin went on to explain that Ally will also compensate borrowers who were affected by the finance source’s policies after December 2013. “… Ally has already started paying some of those borrowers,” she noted.

As for borrowers who obtained a loan between April 2011 and December 2013, Ficklin said the Ally settlement administrator, Philadelphia-based Heffler Claims Group, will be locating them and mailing checks in the coming weeks.

“If you think you are eligible, you should look for a package explaining the specific minimum amount of money that you may be eligible to receive,” Ficklin wrote, in part. “Your actual payment amount may be greater, depending on how many borrowers participate in the settlement.”

The methodology used by the CFPB to determine whether minorities are paying higher rates for auto loans has been called into question by the auto finance industry since the regulator issued its much-contested fair lending guidance in March 2013. A study conducted by Charles River Associates for the American Financial Services Association (AFSA) found that the Bayesian Improved Surname Geocoding (BISG) proxy methodology used by the CFPB accurately identified a customer’s race only 25% of the time. The methodology is used by the CFPB because auto finance sources are prohibited from collecting data on a borrower’s race or ethnicity.

“If you don’t receive a package in the mail by July 15, 2015, but you think you should receive a payment, you can call the Ally Settlement Administrator to ask about your eligibility,” Ficklin added.

Ally has maintained that it does not engage in discriminatory auto lending practices.

“Ally’s long-time process for evaluating auto installment contracts from dealers does not include information on a consumer’s race or ethnicity,” the company said in a statement following its settlement with the CFPB and DOJ. “Ally assesses these contracts and sets pricing based solely on a consumer’s creditworthiness and contract characteristics.”

 

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