CFPB Brings First ECOA Disparate Impact Action Post-Inclusive Communities

Just over 18 months after bringing a disparate impact-based ECOA case against Ally Financial ("Ally") for discriminatory auto loan pricing, the CFPB has struck again—this time taking action against American Honda Finance Corporation ("Honda"). Like Ally, Honda stands accused of discriminatory auto loan pricing stemming from the company's discretionary pricing and dealer compensation practices, i.e., allowing auto dealers to mark up its risk-based interest rate. Interestingly, however, unlike Ally, Honda was not assessed civil money penalties for its actions. Rather, the CFPB credited the company's agreement to reduce its dealer markup cap from as high as 2.25% to as low as 1.00% (depending on the term of the loan) as the reason such penalties were not assessed. The CFPB's December 2013 consent order against Ally had no such provision regarding dealer markup cap reductions.