Follow POL on Twitter Earlier this month, the Bureau of Consumer Financial Protection and the Department of Justice brought an $80 million discriminatory lending action against Ally Financial. Ally, a major recipient of TARP bailout money, allegedly charged different rates based on the race or national origin of borrowers. The loans at issue do not include information about the race or national origin of the borrowers, but "the CFPB and the DOJ assigned race and national origin probabilities to the applicants" based on a geography-based and name-based methodology. In other words, the government's discriminatory lending action is rooted in its assumptions about whether or not borrowers were minorities. Illegal discrimination in lending is just as unacceptable as it is in other contexts, but punishing lenders based on government guesses about whether discrimination occurred is not the solution.
CFPB and Disparate Impact
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| Rafael Mangual Project Manager, Legal Policy rmangual@manhattan-institute.org |
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| Katherine Lazarski Manhattan Institute klazarski@manhattan-institute.org |
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