Honda to pay $25m to settle US discrimination claims

Japanese automaker Honda has agreed to pay $25 million to settle US claims that it discriminated against minority buyers by overcharging them for auto loans, US authorities announced Tuesday.

American Honda Finance Corporation, a unit of Honda based in California, generally discriminated against African-American, Hispanic and Asian borrowers in lending, said the US Justice Department and the Consumer Financial Protection Bureau.

American Honda Finance offers financing to car buyers through auto dealers.

The government alleged that minority borrowers were charged higher interest rates "because of their race or national origin and not because of the borrowers' creditworthiness or other objective criteria related to borrower risk."

For instance, they said, the average African-American borrower paid over $250 more during the loan term because of discrimination, while for Hispanics it was over $200 and for Asians over $150.

Under the settlement agreement, Honda will pay $24 million in compensation for alleged victims and $1 million to fund a consumer financial education program for minorities.

Honda also has agreed to significantly limit the markup in interest rates the dealers can charge, they said.

"We commend Honda for its leadership in agreeing to impose lower caps on discretionary markups and for its commitment to treating all of its customers fairly without regard to race or national origin," said Vanita Gupta, head of the Justice Department's Civil Rights Division, in the statement.

"We hope that Honda's leadership will spur the rest of the industry to constrain dealer markup to address discriminatory pricing."