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FORD CREDIT UNIT SETTLES BIAS SUIT

Nov 9, 2006

Primus is accused of charging blacks higher interest rates for vehicle purchases than whites.
From Bloomberg News (via LA Times)

Ford Motor Co.'s Primus credit unit has settled a nationwide class-action lawsuit in which African American car buyers claimed that the lender discriminated against them.

Primus will limit dealers' discretion to mark up individual customers' interest rates and will offer at least 200,000 preapproved loans to black buyers under a settlement filed Tuesday in U.S. District Court in Nashville.

The customers, suing as a group, claimed that Primus allowed dealers to charge black buyers higher interest rates than whites, adding an average of $387 to the cost of a vehicle, their lawyer, Edwin Lamberth, said.

The suit is one of several against automakers and banks claiming discrimination in interest rates. Lending arms of General Motors Corp., Nissan Motor Co. and DaimlerChrysler settled previously by agreeing to change lending practices.

Primus, a Ford Motor Credit Co. brand, did not admit wrongdoing.

The settlement "means we will avoid the expense of continuing the litigation," David Korman, Ford Motor Credit general counsel, said in an e-mailed statement.

Primus will pay $1.9 million in legal fees and $40,000 in damages to three car buyers who sued. The company also will pay as much as $550,000 in costs and contribute $150,000 to consumer education.

The settlement will save black customers more than $20 million on auto loans, said Lamberth, of law firm Cunningham, Bounds, Yance, Crowder & Bounds in Mobile, Ala. The class of black buyers comprises about 100,000 individuals, he said.

"The case was about discriminatory markups that were part of Primus' lending policy," he said. "The settlement seeks to remedy those effects by reducing the costs of loans to black consumers."

A hearing on preliminary approval is set for today in the Nashville court. Primus primarily provides loans on vehicles from Ford's Jaguar, Mazda and Land Rover units.

The buyers accused Primus of allowing dealers to mark up interest rates based on customers' credit ratings. The practice encouraged subjective markups having a "widespread discriminatory impact" on black customers, the complaint said.

The lawsuit went to a nonjury trial in 2005 before U.S. District Judge Aleta Trauger.

The judge said she would order the company not to let dealers mark up interest rates. She delayed the order to give Primus and attorneys for the buyers a chance to negotiate a settlement.

Ford shares fell 10 cents to $8.63.

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