Cases Allege Finance Discrimination

Sunday, October 22nd 2000, 12:00 am
By: News On 6

NASHVILLE, Tenn. (AP) — 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 U.S. 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 and 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.

Addie D. Coleman says she bought a used Pontiac Grand Am in 1995 with a finance rate of 20.75 percent, 2.50 percentage points higher than the 18.25 percent GMAC granted. Coleman alleges the markup cost her $809.

Betty T. Cason said she purchased her used 1995 Nissan Pathfinder at 19.49 percent, 3 points higher than NMAC's 16.49 percent. Cason alleges the markup cost her $3,500.

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

The cases gained viability in August when two federal judges in Nashville refused to dismiss them in separate rulings.

U.S. District Judge Todd Campbell conditionally expanded the Nissan lawsuit to include blacks across the country. 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. GMAC and NMAC each filed appeals late last month with the 6th U.S. Circuit Court of Appeals arguing that they should not be held responsible for the car dealers' conduct.

But the U.S. Justice Department, in a brief filed in August supporting the plaintiff's action against Nissan, said finance companies should be held liable under the federal Equal Credit Opportunity Act.

Lawyers for the Nashville women said the system permitted car dealers a subjective loan analysis and facilitated a commission-driven atmosphere that encouraged a ``discriminatory impact.'' They cited a deposition by a top NMAC credit official who called such a system ``antiquated.''

Court documents cite studies showing most customers of all races who paid hundreds of dollars above the original rate quoted by the finance company.

In NMAC deals between 1995 and 1998, whites paid an average of $507 more, while blacks paid an average of $969 more, a study says. In GMAC deals, whites at three Tennessee dealers during the same period paid an average of $643 more, while blacks paid $949 more.

Lawyers on both sides declined comment. But in court papers, the financing companies dispute the studies.

GMAC argues that blacks as a group historically earn less than whites and therefore are more likely to have bad credit. GMAC also cites a national study that says blacks are more likely to have a ``pessimistic self-assessment'' of their negotiating skills.