Suits Accuse 2 Auto Finance Firms of Bias

Two prominent automobile finance companies engaged in lending arrangements that resulted in blacks paying higher finance charges than whites, two class-action lawsuits contend.

The lawsuits filed against General Motors Acceptance Corp. and Nissan Motors Acceptance Corp. have gained steam in recent months with support from two federal judges in Nashville and the Justice Department. They could affect tens of thousands of blacks throughout the country.

GMAC and NMAC, the car makers’ finance arms, deny the accusations and argue that studies supporting the accusations are flawed.

According to court documents obtained by the New York Times, ABC’s “20/20” and the Tennessean, NMAC and GMAC struck deals with two Nashville car dealers to mark up finance rates.

When a car sale was imminent, the dealers allegedly provided the customer’s credit application to the finance companies, who would offer a finance rate that was often not revealed to the buyer.

The car dealer then could offer the customer the quoted finance rate or a higher rate, the lawsuits contend. If the customer accepted the higher rate, the car dealer and finance dealer would allegedly split the profit.

The lawsuits were filed in 1998 by two black women upset with the finance rates they were charged at the dealerships.

The plaintiffs are seeking an unspecified amount of money from the finance companies. Trials are more than two years away.

In August, U.S. District Judge Todd Campbell conditionally expanded the Nissan lawsuit to include blacks nationwide. U.S. District Judge Aleta Trauger has limited the GMAC case to blacks in Tennessee.

The cases are certified for class-actions against the finance companies only--not the car dealers.

The Justice Department, in a brief, said finance companies should be held liable under the federal Equal Credit Opportunity Act.