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By assessing nearly $100 million in fines and restitution against Ally Financial on Friday, regulators sent a warning shot to all indirect auto lenders that they will be severely penalized if partnering dealerships charge higher interest rates or fees to minorities.
December 20 -
Although Ocwen Financial agreed to pay more than $2 billion to settle allegations it mishandled foreclosures and mortgages for thousands of borrowers, it could have been even worse for the country's largest nonbank servicer.
December 19 -
The Consumer Financial Protection Bureau accused GE Capital Retail Bank of misleading consumers into a health care credit card product that retroactively charged exorbitant interest rates, marking the agency's first significant attempt to go after such offerings.
December 10
WASHINGTON PNC Financial has reached a $35 million settlement with the Consumer Financial Protection Bureau and Department of Justice over allegations that National City Bank which PNC acquired in 2008 made higher-priced mortgage loans to minorities.
Federal authorities filed a complaint Monday in federal court alleging that National City Bank charged higher prices on mortgages to African-Americans and Hispanic borrowers when compared to similarly situated white borrowers between 2002 and 2008. Since PNC now owns the once-struggling National City, it has agreed to pay $35 million in restitution to affected minority borrowers.
"Borrowers should never have to pay more for a mortgage loan because of their race or national origin," said CFPB Director Richard Cordray in a press release. "Today's enforcement action puts money back in the pockets of harmed consumers and makes clear that we will hold lenders accountable for the effects of their discriminatory practices."
The order follows a handful of actions the CFPB has taken the last two weeks, most recently including another minority discrimination-related settlement with the Justice Department against Ally Financial on Friday related to indirect auto loans. In the National City settlement, authorities allege the bank overcharged more than 76,000 African-American and Hispanic borrowers by using discretionary pricing and compensation policies that allowed loan officers and brokers to set their own rates and fees for borrowers.
"As alleged, the bank charged borrowers higher rates not based on their creditworthiness, but based on their race and national origin. This alleged conduct resulted in increased loan prices for minority borrowers," said Attorney General Eric Holder in the release. "This case marks the Justice Department's latest step to protect Americans from discriminatory lending practices, and shows we will always fight to hold accountable those who take advantage of consumers for financial gain."
The bank made more than 1 million mortgages in its retail branches and 600,000 mortgages through independent brokers in the six years leading up to its acquisition by Pittsburgh-based PNC, authorities said. The complaint alleged that, on average, African-American borrowers paid about $159 more and Hispanic borrowers paid $125 more per year than a similarly situated white borrower. Charges were even higher when the loan came through a broker, averaging $228 and $154 more per year, respectively.
The order, which is pending court approval, calls for the $309 billion-asset PNC to pay $35 million in restitution through a settlement administrator to affected borrowers. Authorities also acknowledged that PNC does not use the same mortgage origination policies National City.
"This settlement puts to rest allegations associated with the residential mortgage lending of National City Bank prior to its acquisition by PNC. PNC is committed to fair lending for all," said Fred Solomon, spokesman for PNC in an emailed response. "Once PNC acquired National City Bank, we took steps to improve policies and procedures governing the mortgage lending business of National City, discontinue National City's mortgage broker channel, and discontinue certain practices reviewed by the agencies."
