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FORD CREDIT UNIT SETTLES BIAS SUIT FOR $2.64 MILLION

Nov 9, 2006

Class action accused firm of charging black customers higher loan rates
By NAOMI SNYDER
Staff Writer
Tennessean.com

Ford Motor Credit Co. has agreed to pay $2.64 million to settle a 4-year-old class-action lawsuit that accused the company of charging higher loan rates to black customers than to whites.

The company also agreed to set aside 200,000 reduced-rate loans to black customers.

The lawsuit was one of several filed during the past several years accusing automobile manufacturers' finance arms of policies that discriminated against black customers. Lending arms of General Motors Corp., Nissan Motor Co. and DaimlerChrysler AG settled previously by agreeing to change lending practices.

This lawsuit involves Primus loans, a brand of Ford Motor Credit, which employs about 1,400 people in a Cool Springs call center. Primus loans primarily finance Ford's Jaguar, Mazda and Land Rover vehicles.

The company admitted no wrongdoing in the settlement.

"We're pleased to avoid the cost of continued litigation," said Meredith Libbey, a spokeswoman for Ford Motor Credit.

Only three plaintiffs will get cash payouts as a result of the settlement, including Edwin Borlay, who drives a taxi in Nashville. Borlay declined to comment.

On average, blacks were paying about $400 more than whites over the life of their auto loans, said Edwin Lamberth, a plaintiffs attorney for Cunningham Bounds Crowder Brown and Breedlove in Mobile, Ala.

The settlement limits the discretion given to auto dealers to mark up interest rates for loans.

Finance companies often have two numbers to determine the annual percentage rate on a loan - the first is called the "buy rate" and factors in the consumers' credit history. Then dealers are allowed to mark up that rate and keep a profit.

"Large markups were occurring in minority populations," Lamberth said.
Ford has maintained that its policies were not discriminatory.

After the lawsuits were filed, Ford Motor Credit and other auto finance companies reduced the markups that dealers are allowed.

Under the terms of the settlement, markups will be capped at 1.5 percent to 2.5 percent, depending on the length of the loan. Those rules apply to all customers, regardless of race.

In addition, the settlement says Ford must pay $150,000 to fund consumer credit finance education.

Plus, Ford must create a database of black consumers who took a Primus loan between January 1990 and the settlement date. Ford will use that database to offer loans to 200,000 black customers without any markup.

Lamberth estimated the settlement deal could be worth $20 million to black consumers if they get new loans, although he said all future Primus customers will benefit from the reduced markups.

"We are committed to providing vehicle financing to a broad range of customers and to educating consumers so they can make the best decisions for their circumstances,'' said Ford Motor Credit attorney David Korman, in a statement.

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