Ford Motor Credit Corporation Discrimination Trial Begins Today

BOSTON – A national class action lawsuit challenging the auto lending practices of Ford Motor Credit Company (FMCC) and its brand name Primus Automotive Financial Services, Inc. (PRIMUS) begins trial on Tuesday, March 1.

Primus, the named defendant in the case, is a division of FMCC. It offers automobile financing services to consumers throughout the nation using the brand names Mazda American Credit, Land Rover Credit, and Jaguar Credit, pursuant to contracts with Mazda, Land Rover, and Jaguar. Plaintiffs contend that the credit pricing policies developed and managed for Primus by FMCC and marketed using either Ford Credit, Mazda American Credit, Land Rover Credit, or Jaguar Credit discriminate by charging African Americans more for credit, for reasons not related to creditworthiness.

The lawsuit alleges that Primus’s lending policies permit and encourage a practice known as “auto finance markup” that has a discriminatory impact on African-American plaintiffs and results in their paying more for credit than White consumers with comparable credit ratings. The markup occurs when a consumer requests a car dealer to arrange financing for a car purchase. Typically the dealer submits the consumer’s credit application to a lender who determines an approved interest rate by examination of the consumer’s credit history. The lender then communicates the approved interest rate to the dealer and authorizes the dealer, without informing the consumer, to subjectively add percentage points to the interest rate of their loan without regards to their creditworthiness. The dealer and the lender then split the markup, as additional profit. Markup costs to a consumer over the life of the loan can range from hundreds to thousands of dollars. Studies of industry data filed in various court cases, including the case against Primus, have asserted that African-American and Hispanic consumers are more likely to receive the markup and that they on average pay higher markup fess than White customers.

This case is the first to go to trial in a series of lawsuits alleging racial discrimination in the practice of the auto finance markup. The first such suit was filed against Nissan Motors Acceptance Corporation (NMAC) in 1998. NMAC subsequently settled out of court, as have General Motors Acceptance Corporation and WFS Financial, Inc., as a result of similar claims of discrimination caused by their auto finance markup practices brought by African American consumers under the Federal Equal Credit Opportunity Act. American Honda Finance Corporation, BankONE, Bank of America and US Bank, have each reached tentative settlement agreements that are pending final court approval. The National Consumer Law Center has participated as one of the co- counsel in each of these suits and has an appearance filed on behalf of the plaintiffs in the Primus case.

The proceedings will begin at 9:00 a.m., on Tuesday March 1, 2005, under United States District Judge Aleta A. Trauger, Middle District of Tennessee, in Courtroom 873, United States Courthouse, 801 Broadway, Nashville, Tennessee. Case No. 3-02-0382, Latonya Claybrooks, et al. versus Primus Automotive Financial, a division of Ford Motor Credit, United States District Judge Aleta A. Trauger, Middle District of Tennessee.