Ally Financial Inc. has agreed to a settlement with the federal government in which it will pay $18 million in penalties. That’s less than a quarter of what it will be paying into a settlement fund – another $80 million.
This settlement is the result of allegations that the financing company practiced discrimination against people who are minorities in its auto loans. It is part of a “consent order” with both the U.S. Department of Justice and the Consumer Financial Protection Bureau. These two federal entities contend that car dealers were allowed to “mark up Ally’s rate at which it buys a retail installment contract.”
As we often see in these settlements, while agreeing to pay a substantial sum of money, Ally has denied that neither it nor the dealers from whom it buys installment agreements practiced discrimination. After the settlement, the company said that the dealer contracts it receives do not indicate the customers’ ethnicity or race. Ally insists that it “assesses these contracts and sets pricing based solely on a consumer’s creditworthiness and contract characteristics.”
The DOJ and CFPB see it differently. They contend that Ally did not oversee the pricing of its dealers carefully enough. As part of the settlement, Ally says that it will be “enhancing dealer monitoring.”
No company wants to be caught up in any type of business litigation, let alone allegations of discrimination by the federal government, both for financial and public relations reasons. However, when this occurs, it is essential that a business has a strong legal team to represent its side, protect its interests, and, if necessary, negotiate the best deal possible under the circumstances.
Source: Crain’s Detroit Business, “Ally Financial settles with U.S. government for $98 million” Tom Henderson, Dec. 20, 2013