(New York Times) – Minority borrowers were once starved for credit through redlining — banks’ refusal to provide mortgages in their communities.
Now the booming auto industry has turned that historic wrong on its head, government authorities say, singling out minority borrowers and extending them the costliest car loans, a development that threatens to exacerbate the economic distress in some black and Hispanic neighborhoods.
The practice, known as reverse-redlining, is presenting new challenges for government authorities trying to shield the most vulnerable Americans from predatory lending. Prosecutors from the Justice Department and top officials with the Consumer Financial Protection Bureau are grappling with how to root out the practice in a fractured industry, where some of the least regulated players, the auto dealers, wield the most power and where virtually no national data exists to quantify the problem.
The Justice Department’s Civil Rights Division is now examining whether dealerships are discriminating against their minority borrowers.
“In every facet of the auto lending market, combating discrimination is a top priority for the Civil Rights Division,” Vanita Gupta, acting assistant attorney general for the division, said in an interview. Ms. Gupta joined the Justice Department in October from the American Civil Liberties Union, where she was deputy legal director and headed its Center for Justice.