Stung by suits charging inflation of interest rates to minorities,Credit has capped the dealer markup on consumer loans at three percentage points. The action, effective in November, follows a similar rate ceiling that GMAC set in August.
Announced at a Detroit meeting of Rev. Jesse Jackson's Rainbow/PUSH Coalition, the auto maker curbs on dealer markups came on the heels of suits filed in Tennessee and New York alleging that several auto maker captives colluded with dealers to charge higher interest rates to minorities on vehicle loans than they did to white customers.
In response,Credit said dealers in Tennessee set their own interest rates and served notice of a damage suit against its dealers in that state.
Credit's executive vice-president of consumer financial services, Robert Charles, says no cap had existed previously and the new three-point ceiling “is targeted at the guy who tries to gauge the customer.”
Charles says a higher markup might be allowed by Ford Credit for prime risk customers, but few such deals would arise.
GMAC has donated $100,000 to Rainbow/PUSH for community programs aimed at educating consumers about personal finance.