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Associated Press Newswires
Nissan Charges Hispanics Higher Interest Rates Than Whites
By TAL ABBADY
November 18, 2002
MIAMI (AP) - When Carlos Colon bought his first car in 2000, the Nissan salesman congratulated him on getting a sweet deal.
Colon, who had moved from Puerto Rico to Miami in 1995, didn't question the 11 percent interest rate Nissan was charging for his new Xterra.
But a study filed last month in a pending lawsuit claims Nissan got the best end of the deal with customers such as Colon. The study says Colon may be among thousands of Florida Hispanics charged higher rates than white clients with the same credit history.
Nissan officials deny the allegations. "We don't know the race of our customers. We're not allowed to know it," said Alan Hunn, managing counsel for Nissan North America in Torrance, Calif.
Colon, vice president of U.S. Chemical & Funeral Supplies in Miami, is paying close to $600 a month on his car. Lawyers claim his interest rate is 40 percent more than the average rate charged white clients with the same credit record.
"I was told I got the best possible deal," Colon said. "But I keep paying and paying and paying."
Lawyers submitted the study about Nissan's lending practices in Florida as part of a class-action suit pending in federal court in Tennessee.
The suit accuses Nissan's lending company, Nissan Motor Acceptance Corp., of charging blacks higher interest rates than whites with the same credit rating.
Researchers from Yale and Vanderbilt universities used more than one million customer files and race-coded driver's license records available from several states to argue a pattern of discrimination.
White customers fall prey to the "dealer markup" as well, the lawsuit claims, but their markups tend to be significantly lower.
Dealers are not required to disclose a car buyer's actual credit score or any added markups on the interest rate.
Nissan says the Florida study is oversimplified and flawed. Hunn said researchers did not take into account the varying prices of cars and loan payment terms.
"If you factor in all the variables, you don't see the numbers they're getting," Hunn said. "The tendency is to try to create comparisons between customers who are different in many respects, more than just race."
Hunn disputed allegations that individual dealerships provide lenders with a client's race and use the information to hike interest rates.
But lawyers representing black Nissan clients say that even when the variables of loan terms and prices are factored in, a pattern still emerges.
"The policies appear neutral on their face," said Stuart Rossman of the National Consumer Law Center in Boston and co-counsel in the case. But in practice they target hundreds of thousands of minority customers, Rossman said.
Florida's unique driver's license race code for Hispanics allowed analysts to profile that minority group.
Between 1993 and 2000, according to the study, Florida Hispanics paid higher interest rates than whites - sometimes as much as 12 percent annually - while a white customer with the same credit history was charged 8 percent.
These undisclosed rate hikes cost the average Hispanic an extra $300, the study said. Irrespective of credit history, Hispanics paid an average of 40 percent more in markups than whites.
Industry consultant David Stivers, who managed dealerships for several car makers including Nissan in the 1980s, said company officials pressured him to hike rates for minority borrowers.
Spanish-speaking customers are often guided through a sale in Spanish until they're presented with a contract to sign, where markups and credit pricing tactics are in the English fine print, said Stivers, who now advises consumer groups and law firms.
"At that point the customer is past the point of no return," he said. "He's agreed to fork over a deposit. He doesn't realize the interest rate quoted to him is not the one he was approved for, and the contract language is difficult to understand."
Ted Smith, director of the Florida Automobile Dealers Association, said the auto industry is a popular target for lawyers. He said lawsuits such as the one in Tennessee are "fishing expeditions."
"I understand how financing is done," Smith said. He said markups are "not part of the practice."
Rosemary Shahan, head of Consumers for Auto Reliability and Safety in Sacramento, Calif., said customers can beat the markup game by turning to credit unions and online lenders for their credit scores and better interest rates.
The Department of Justice has investigated interest rate gouging in the auto and home mortgage businesses for years, according to Bill Lann Lee. Lee served as assistant attorney general for civil rights under former president Bill Clinton. The practice was regulated in mortgage lending, but it remains unfettered in auto lending, Lee said.
"We're talking about the ability to buy a car, one of two major purchases for most Americans," he said. "It's been a real problem."