The Department of Justice recently announced that it had settled a lawsuit filed in 2019 that alleged a Maryland used car dealership discriminated against African Americans in violation of the Equal Credit Opportunity Act by offering different credit terms based on race.  The settlement includes the DOJ’s claims against the dealership’s individual owner and its manager.

The lawsuit was based on information obtained through the use of testers posing as prospective car buyers. The DOJ’s complaint alleged that dealership employees offered more favorable financing terms on the same motor vehicles to white testers than to African American testers with similar credit characteristics, including: (1) allowing white testers to fund down payments in two installments when African American testers were not given that option, (2) quoting higher biweekly payments to African American testers on “buy here, pay here” retail installment sales contracts than to white testers, and (3) making other statements to discourage African American testers.

The consent order requires the dealership to do the following:

  • Develop a written policy designed to ensure ECOA compliance that, at a minimum, standardizes procedures for all credit applicants and reduces the discretion of individual decision makers in determining credit terms (including for “buy here, pay here” RICs) by setting forth (1) what income and other eligibility requirements apply to customers, (2) how minimum down payments and bi-weekly payments are calculated, (3) whether down payments can be made in multiple installments and under what circumstances, and (4) whether customers must purchase warranties as part of their financing terms.
  • Prominently display a prescribed notice of non-discrimination in the location where financing applications are received
  • Provide ECOA training to employees conducted by an independent third-party, with all attendees to sign a prescribed statement acknowledging attendance
  • Submit a report to the DOJ every six months that includes specified information for each vehicle sold by the dealership through a “buy here, pay here” RIC or other financing if the defendants negotiated or influenced any of the financing terms.