Fifth Third Bank today reached a Honda Finance-style consent order with the Consumer Financial Protection Bureau and the U.S. Department of Justice, including a lower ceiling on dealer markup of 1% or 1.25% over the buy rate depending on the term, plus a total of $18 million in refunds to consumers.
CFPB Director Richard Cordray commended Cincinnati-based Fifth Third in a written statement, “for its commitment to treating all of its customers fairly without regard to race or national origin and its leadership in agreeing to impose lower caps on discretionary markups.” In the period covered by the consent order, Fifth Third’s maximum markup was 2.5% over the buy rate, the CFPB said,
The CFPB reached a similar consent order with American Honda Finance Corp. in July. The two consent orders were similar in that Fifth Third and Honda Finance agreed to limit, but not eliminate, dealer reserve, also known as dealer markup. Also like Honda Finance, Fifth Third was not assessed a civil penalty on top of consumer restitution. Honda Finance paid $24 million in refunds.
In contrast, Ally Financial Inc. paid $80 million in refunds, plus a civil penalty of $18 million, in a December 2013 consent order.
According to the CFPB, Fifth Third was responsible for “thousands” of African-American and Hispanic consumers paying 35 to 36 basis points, or about $200 over the life of the average loan, more than borrowers who were not members of those legally protected classes. Fifth Third already refunded about $6 million, which counts toward the $18 million, the CFPB said. The consent order covered loans made between January 2010 and September 2015, the bureau said.
For more content like this, check out the upcoming Auto Finance Summit, October 21-23 at Wynn Las Vegas. Visit www.AutoFinanceSummit.com for more information.
