DOJ reaches $18-million settlement with Fifth Third Bank
Staff report
WASHINGTON
Allegations of discrimination against Fifth Third Bank have been resolved with a multimillion-dollar settlement.
The Department of Justice and the Consumer Financial Protection Bureau on Monday announced an $18 million settlement to resolve allegations that Fifth Third engaged in practice of discrimination against African-American and Hispanic borrowers in its indirect auto-lending business.
The settlement, which is subject to court approval, includes compensation for African-American and Hispanic borrowers who were overcharged, and requires changes to the way Fifth Third prices automobile loans.
Fifth Third’s settlement was filed in the U.S. District Court for the Southern District of Ohio in conjunction with the Department of Justice’s complaint.
Specifically, Fifth Third has agreed to change the way it prices its loans by limiting dealer markup to 125 basis points, or 1.25 percent, for loans of 60 months or less, and to 100 basis points, or 1 percent, for loans greater than 60 months.
The settlement also requires Fifth Third to improve its monitoring and compliance systems.
“We commend Fifth Third 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,” Vanita Gupta, principal deputy assistant attorney general, said in a statement.
The investigation relates to what are called “indirect” auto loans. Rather than taking applications directly from consumers, the bank makes most of its auto loans through car dealers who help customers pay for their new or used car by submitting their loan application to Fifth Third.
Fifth Third’s previous business practice allowed car dealers’ discretion to mark up a loan’s interest rate from the price Fifth Third initially sets based on the borrower’s objective credit-related factors.
“In reaching this settlement, Fifth Third stands firm in its conviction that we have treated and will continue to treat our customers in a fair, open and honest manner,” Fifth Third said in a statement.
The settlement fund will be managed by an independent settlement administrator, the bank said.