Honda, Toyota captives face legal challenge over pricing policies

Honda’s US captive financing unit has revealed that the Consumer Financial Protection Bureau (CFPB) and the US Department of Justice are set to file charges alleging it discriminates against some categories of borrowers in its pricing practices for loans made through auto dealerships.

American Honda Finance Corp. (AHFC) made a filing to the US Securities and Exchange Commission (SEC) last week, which said the company had “received a notice that the agencies have authorized enforcement actions against AHFC, alleging discrimination in automobile loan pricing to certain borrowers by dealers and alleging the loan pricing disparities were caused by AHFC’s business practices related to dealers.”

Honda Finance said the federal agencies are seeking financial compensation for customers, and changes in the company’s pricing policies and practices, but were willing to re-consider legal action if the company co-operated with the authorities.

“AHFC has also been informed that the agencies may defer pursuit of this litigation if AHFC works with the Agencies to seek a voluntary resolution to these allegations,” the filing said.

The AHFC disclosure follows news of a similar SEC filing in late November from Toyota Motor Credit Corp. saying it faced enforcement action over alleged discriminatory pricing of loans to certain borrowers.

The Toyota Motor Credit Corp filing stated: “The agencies have indicated that they are seeking monetary relief and implementation of changes to our discretionary pricing practices and policies, which changes could adversely affect our business. We intend to continue to cooperate with the agencies to achieve a mutually satisfactory resolution.”

In a subsequent press statement the company said it has been working for the past two and a half years to improve its compliance with fair lending regulations.
In December 2013, Ally Financial Inc was ordered to pay $98 million to resolve accusations of discriminatory pricing for some classes of borrowers from the Justice Department and the CFPB. The CFPB has recently indicated it would like to extend its remit to regulating “larger participants” in the auto lending market, including nonbank lenders.