Discrimination in Auto Loan Rates

Some people believe that in this day and age discrimination does not still go on to the extent that it used to, and in some ways they are right. However, in many ways they are not. People are still discriminated against for many things – the color of their skin, whether they are Catholic, Jewish, or some other religious preference that people don’t like, even for the clothes they wear and the cars they drive.

However, according to the federal Reserve, discrimination in auto loan rates and mortgages has been continuing as recent as 1995. They say that their research has found that minority households were paying higher interest rates on their home and auto loans, even when all other factors were the same.

They took white households and compared them with various minorities, and found that in those that were similar in every way except for race the minority household would pay more in interest rates for their home and auto loans than the white household would.

The research came out of sub-prime loans that they were looking into, because of the rising foreclosure rates. They found that Blacks and Hispanics were having more problems with the foreclosure rates than the whites were. The research shows that discrimination tapers off after 1995, but some home and auto loans were still showing unexplainable racial disparity as late as 2004.

The research shows that on first mortgages’ interest rates written before 1995, minorities had about 20 basis points more than white households did. It also showed that for auto loans, the difference was about 80 basis points. They think that the evening out of racial disparities at the end of the 1990’s led to the change, but they were still there – just not as rampant.

Back to July 07 Archives