Ally Bank To Pay $98 Million For Charging Higher Interest To Non-White Borrowers

Consumerist ^ | December 20, 2013

[Salvavida]

Fact. This article doesn't address how they made the correlation. I just looked at their credit application: race isn't part of the intake.

They need to appeal.

[17th Miss Regt]

It seems charging those on the lower ends of the ladder higher interest rates is down right punitive.

Alternatively, charge everyone the same interest rate regardless of credit. But raise the rates on everyone so that the expected losses from non-creditworthy borrowers is covered adequately. Example: Poor credit risks may pay 15% APR on an auto loan and good credit risks may pay 9% on an auto loan. If we charge everyone 21% on all auto loans the losses will be covered. Kinda like Obamacare for the credit sector of the economy...

[E. Pluribus Unum]

People with a higher default rate get charged a higher interest rate.

That's how banking works.

Blacks were NEVER being discriminated against because they had a much higher default rate than anybody else. They were being treated more leniently than they would have been in a logical world.

A world run by affirmative-action zealots is not a logical world.

[E. Pluribus Unum]

Ally Bank, AKA GMAC.

The Alinskyites are eating their own.

[dragnet2]

Do you deny what the banks, credit cards companies and lenders charge for loans and interest rates, regardless of credit history, is obscenely high?

[Colonel_Flagg]

It seems charging those on the lower ends of the ladder higher interest rates is down right punitive.

And when those loans go bad, as they occasionally do, the lender is the one who eats the loss. A person with a low credit score who defaults on a loan still has a low credit score.

Generally speaking, loans to people with low credit scores are limited both in term and in loan-to-value ratio (meaning they need a greater downpayment on a vehicle to qualify for a loan, if you are not familiar with the term).

A good lender will be able to see when someone is down on his or her luck, especially if they are at a community bank or credit union as opposed to a big bank. It's not unheard of for some of those people to get some slack.

[dfwgator]

From "White Like Me" on SNL

Loan Officer: Now, let me get this straight, Mr., ..uh.. Mr. White. You'd like to borrow $50,000 from our bank, but you have no collateral, you have no credit. You don't even have any I.D. Is that correct?

Eddie Murphy: That's right.

Loan Officer: Mr. White, I'm sorry. This is not a charity. This is a business...

White Loan Officer: Uh, Harry, why don't you, uh, take your break now? I'll take care of.. uh.. Mr. White.

Loan Officer: Well.. okay. Thanks, Bob. [ exits ]

White Loan Officer: [ laughs, then sits ] That was a close one, wasn't it?

Eddie Murphy: It certainly was.

White Loan Officer: We don't have to bother with these formalities, do we, Mr. White? Huh?

Eddie Murphy: What a silly Negro!

White Loan Officer: Just take what you want, Mr. White. Pay us back anytime. Or don't. We don't care.

Eddie Murphy: Tell me, do you know of any other banks like this in this area?

[dragnet2]

It seems charging those on the lower ends of the ladder higher interest rates is down right punitive.

And when those loans go bad, as they occasionally do, the lender is the one who eats the loss.

Do they not go after those who never paid? And if they are such bad risks, why are they still lending them money?

How did those running the big banks become worth tens of hundreds of billions?

Are bankers our friends?

[dragnet2]

Do you deny what the banks, credit cards companies and lenders charge for loans and interest rates, regardless of credit history, is obscenely high?

[dfwgator]

I'll be called anti-capitalist, but its my opinion what the banks, credit cards companies and lenders charge for loans and interest rates is criminally obscene.

Who puts a gun to their heads and forces them to take the loan?

[Colonel_Flagg]

Do they not go after those who never paid? And if they are such bad risks, why are they still lending them money?

They do. They have to. It's part of the cost of doing business. But, as I'm sure you know, like in the case of some welfare cheats, there are people who take out loans with the intention of never paying them back.

The reason financials pursue those loans is loan spread. Simply put, a financial will make more money with a loan at 13 percent than they will at five percent. So if those loans stay good, they will be more profitable to the financial institution. Believe it or not, financials actually do look for higher-risk loan clients that they think will be able to meet their new obligations. They are money makers.

How did those running the big banks become worth tens of hundreds of billions? Are bankers our friends?

Please note that I wasn't defending big banks in my earlier post. I referred to smaller banks and credit unions, which are not for profit. I would agree with you that many bankers are not our friends. That's why people need to be discerning in where they seek loans.

[17th Miss Regt]

That is a very general statement and the phrase “obscenely high” is open to a wide degree of interpretation. I agree that a lot of credit card companies may charge fairly high interest rates but the answer to that is to avoid using them a lot and pay them off as quickly as you can. Then the interest rates don’t matter as much. Do you think that all interest rates should be lowered to some standard rate? If so, what is that rate?

[dragnet2]

No one puts a gun to their heads, but sometimes Americans with little means need help.

Are bankers to be trusted?

[dragnet2]

If these people on the low end cause such risks and cause so many loses for the bankers, how is it the bankers worth tens of hundred of billions?

[dfwgator]

No one puts a gun to their heads, but sometimes Americans with little means need help.

That's what family, friends and churches are for.

[Jim from C-Town]

That is the only reason they paid higher rates. They had lower credit scores and ratings.

My wife and I went from a family of two with a six figure income to a family of seven with an income of less than fifty thousand dollars and STILL have a top notch credit rating. Why? Because we only borrow money we can afford to pay back and pay all our bills on time.

Too many people think they are owed loans and low credit rates because they just do. If you have bad or no credit, you should be thankful anyone is willing to lend to you at all at any rate of interest.

[Colonel_Flagg]

Do you deny what the banks, credit cards companies and lenders charge for loans and interest rates, regardless of credit history, is obscenely high?

Yes, I do. My local credit union offers a 4 percent rate on a new or used car loan -- same rate for either one. The top rate is 13 percent for credit that is horrible.

You just have to know where to look. I wouldn't get that rate at a big bank. But find a community bank or a credit union and you might be pleasantly surprised. Competition for loans in this economy is fierce and that is reflected in rates at the right places.

[dragnet2]

That is a very general statement and the phrase “obscenely high” is open to a wide degree of interpretation.

No it's not. Are you suggesting high powered greed does not run rampant in the banking industry?

[dragnet2]

Are you suggesting high powered greed does not run rampant in the banking industry?

[TChad]

Ummmm... were the research results adjusted for credit scoring?

That would be RAAACIST!