A Disgrace Hidden in the Noise....

[kadee79]

Buried deep in the Business section of the print edition of today's Times is a story so disgraceful that if it weren't for Donald Trump's obliterative pink noise, it would be front page news:



The Senate voted on Wednesday to overturn an Obama-era rule that restricted automobile lenders from discriminating against minorities by charging them higher fees for car loans, in the latest attempt by Republican lawmakers to roll back financial regulations.

Republican lawmakers, along with one Democrat, Senator Joe Manchin of West Virginia, seized on the Congressional Review Act to overturn guidance issued in 2013 by the Consumer Financial Protection Bureau. The 1996 law gives Congress the power to nullify rules formulated by government agencies but has primarily been used to void recently enacted rules.

After the Government Accountability Office determined late last year that the consumer bureau’s 2013 guidance on auto lending was technically a rule that could be rolled back, Republicans, led by Senator Patrick J. Toomey of Pennsylvania, targeted it for rescission by using the Congressional Review Act. The House is expected to follow suit and also use the Congressional Review Act to void the guidance.

Republicans have long derided the consumer bureau, created by the 2010 Dodd-Frank law, for exceeding its authority, and President Trump’s pick to lead the agency on an interim basis, Mick Mulvaney, has largely frozen its rule-making and enforcement.

digbysblog.blogspot.com/2018/04/a-disgrace-hidden-in-trumps-noise.html

[tallguy]

There's so much of this going on, this gratuitous maliciousness towards nearly everyone except a few money-stuffed cronies.
I just don't get it. I've been told I have a pretty good imagination but for the life of me, I can't figure how anyone can be so systematically cruel, petty, and bigoted. What is wrong with these people?

The GOP - Proudly in its fourth decade of working against the American people.

[Virgil Showlion]

Apr 20, 2018 21:01:27 GMT -5 tallguy said:

There's so much of this going on, this gratuitous maliciousness towards nearly everyone except a few money-stuffed cronies.
I just don't get it. I've been told I have a pretty good imagination but for the life of me, I can't figure how anyone can be so systematically cruel, petty, and bigoted. What is wrong with these people?

The GOP - Proudly in its fourth decade of working against the American people.

"The Senate voted on Wednesday to overturn an Obama-era rule that restricted automobile lenders from discriminating against minorities by charging them higher fees for car loans, in the latest attempt by Republican lawmakers to roll back financial regulations."

Several minorities have a higher rate of defaulting on loans. Associated costs are passed along to consumers in the form of fees, higher rates, etc. This repeal would appear to allow actuarial calculations to take race into account when assessing risk, meaning penalties are paid by the minority rather than distributed over the entire population.

It's capitalism vs. socialism. There is no cast-in-stone right answer.

In my mind, the appropriateness of the measure depends on the disparity in risk. For example, if first-generation Somali immigrants have a 7.5% risk of default versus 2.5 for the general population--a 200% disparity-I have no qualms with passing the costs onto first-generation Somali immigrants. If the difference is marginal--2.5% vs. 2.7%, say--the bad outweighs the good. The greater population will just have to take one for the team.

[busymom]

This is wrong on so many levels, that I have no words.  Surely, this can't be constitutional?  It's a shame you have to constantly take some businesses to court to make them "do the right thing".

[billisonboard]

Apr 21, 2018 8:57:35 GMT -5 Virgil Showlion said:

...

Several minorities have a higher rate of defaulting on loans. ...

"Minorities" don't default, individuals default.

(Using a technique I saw somewhere )

"Sir, we ran your credit and see you are eligible for an interest rate of 4.3%"

"That is great. Where do I sign?"

"Right here. Whoops, I didn't realize you were left handed. Left handed people default on loans at a higher rate so we will have to increase your interest rate to 5.3%."

"But all the work I did to raise my score?"

"Sorry Sir, maybe you should talk to all those people like you to get them to be more responsible."

[Virgil Showlion]

Apr 21, 2018 9:29:09 GMT -5 billisonboard said:

Apr 21, 2018 8:57:35 GMT -5 Virgil Showlion said:

...

Several minorities have a higher rate of defaulting on loans. ...

"Minorities" don't default, individuals default.

(Using a technique I saw somewhere )

"Sir, we ran your credit and see you are eligible for an interest rate of 4.3%"

"That is great. Where do I sign?"

"Right here. Whoops, I didn't realize you were left handed. Left handed people default on loans at a higher rate so we will have to increase your interest rate to 5.3%."

"But all the work I did to raise my score?"

"Sorry Sir, maybe you should talk to all those people like you to get them to be more responsible."

(meanwhile)

Virgil: "That is great. Where do I sign?"

Insurer: "Right here. Whoops, I didn't realize you were male and age 21-35. That'll be $550 a month for your auto insurance, not $200 a month."

Virgil: "But I'm an individual! I've never been in an accident."

Insurer: "Sorry, sir. Maybe you should talk to all those people like you to get them to be more responsible."


So which is it? Are we a socialist society where everyone pays equally for the bravado of young male drivers and increased minority credit risk, or are we a capitalist society where young males bear the brunt of being young and male and minorities bear the brunt of being a minority?

I'd welcome passing my higher insurance costs onto women and older men.

[billisonboard]

Apr 21, 2018 16:19:19 GMT -5 Virgil Showlion said:

Apr 21, 2018 9:29:09 GMT -5 billisonboard said:

"Minorities" don't default, individuals default.

(Using a technique I saw somewhere )

"Sir, we ran your credit and see you are eligible for an interest rate of 4.3%"

"That is great. Where do I sign?"

"Right here. Whoops, I didn't realize you were left handed. Left handed people default on loans at a higher rate so we will have to increase your interest rate to 5.3%."

"But all the work I did to raise my score?"

"Sorry Sir, maybe you should talk to all those people like you to get them to be more responsible."

(meanwhile)

Virgil: "That is great. Where do I sign?"

Insurer: "Right here. Whoops, I didn't realize you were male and age 21-35. That'll be $550 a month for your auto insurance, not $200 a month."

Virgil: "But I'm an individual! I've never been in an accident."

Insurer: "Sorry, sir. Maybe you should talk to all those people like you to get them to be more responsible."


So which is it? Are we a socialist society where everyone pays equally for the bravado of young male drivers and increased minority credit risk, or are we a capitalist society where young males bear the brunt of being young and male and minorities bear the brunt of being a minority?

I'd welcome passing my higher insurance costs onto women and older men.

Remember that foolish consistency thing. That is where you are on this one.

Here is a factor to consider with that insurance rate. I didn't pay that high a rate because I was in college in my early to mid twenties and received a good student discount. That is offered because insurance companies know it is a way to identify a lower risk individual and price accordingly. In the credit world, there is also a way to identify a lower risk individual. Do you know what it is? (A hint: as shocking as it might be to you it isn't skin color) It is called a credit score. For the most part, it is on what credit rates are based usually. 

[weltschmerz]

Apr 21, 2018 16:19:19 GMT -5 Virgil Showlion said:

Apr 21, 2018 9:29:09 GMT -5 billisonboard said:

"Minorities" don't default, individuals default.

(Using a technique I saw somewhere )

"Sir, we ran your credit and see you are eligible for an interest rate of 4.3%"

"That is great. Where do I sign?"

"Right here. Whoops, I didn't realize you were left handed. Left handed people default on loans at a higher rate so we will have to increase your interest rate to 5.3%."

"But all the work I did to raise my score?"

"Sorry Sir, maybe you should talk to all those people like you to get them to be more responsible."

(meanwhile)

Virgil: "That is great. Where do I sign?"

Insurer: "Right here. Whoops, I didn't realize you were male and age 21-35. That'll be $550 a month for your auto insurance, not $200 a month."

Virgil: "But I'm an individual! I've never been in an accident."

Insurer: "Sorry, sir. Maybe you should talk to all those people like you to get them to be more responsible."


So which is it? Are we a socialist society where everyone pays equally for the bravado of young male drivers and increased minority credit risk, or are we a capitalist society where young males bear the brunt of being young and male and minorities bear the brunt of being a minority?

I'd welcome passing my higher insurance costs onto women and older men.

Wait....WE?
You're an American, now?

[Virgil Showlion]

Apr 21, 2018 16:47:33 GMT -5 billisonboard said:

Apr 21, 2018 16:19:19 GMT -5 Virgil Showlion said:

(meanwhile)

Virgil: "That is great. Where do I sign?"

Insurer: "Right here. Whoops, I didn't realize you were male and age 21-35. That'll be $550 a month for your auto insurance, not $200 a month."

Virgil: "But I'm an individual! I've never been in an accident."

Insurer: "Sorry, sir. Maybe you should talk to all those people like you to get them to be more responsible."


So which is it? Are we a socialist society where everyone pays equally for the bravado of young male drivers and increased minority credit risk, or are we a capitalist society where young males bear the brunt of being young and male and minorities bear the brunt of being a minority?

I'd welcome passing my higher insurance costs onto women and older men.

Remember that foolish consistency thing. That is where you are on this one.

Here is a factor to consider with that insurance rate. I didn't pay that high a rate because I was in college in my early to mid twenties and received a good student discount. That is offered because insurance companies know it is a way to identify a lower risk individual and price accordingly. In the credit world, there is also a way to identify a lower risk individual. Do you know what it is? (A hint: as shocking as it might be to you it isn't skin color) It is called a credit score. For the most part, it is on what credit rates are based usually. 

If a person of race x with a credit score of C is statistically indistinguishable from a person of race y with a credit score of C for all x, y, and C, and if C is a datum accessible to all lenders, then discrimination on the base of race is unfair, I agree.

At a baseline level, this is probably the case. My understanding is that any lender has a simple sheet: credit score of C, loan N = rate r. But this is only the base rate, since the credit score only represents the borrower's past performance on loans. There are factors it doesn't account for, some of which are no doubt correlated to race: income, access to collateral, size of account (e.g. does the customer do a lot of business with the lender), loyalty, etc.  Every one of them can be used by the customer to negotiate a lower rate... unless the lender's hands are tied. By a well-meaning but overreaching rule, for instance, since the statistics would reflect differences in average loan rates to different races, which are prohibited.

Is this the case here?

The only thing the NYT says about the rationale for the rescission of the rule is:

But business groups and Republicans cheered the move, saying it would ease lending restrictions for car purchases.

“The legislation is a measured response to the CFPB’s attempt to regulate the $1.1 trillion auto financing market, avoid congressional scrutiny by issuing ‘guidance,’ and impose a new policy without necessary procedural safeguards,” said Peter Welch, president of the National Automobile Dealers Association.

Mr. Toomey hailed the rollback of the auto-lending restrictions as the repeal of an “ill-conceived regulation” and a sign that Congress was ready to reassert control over government agencies that have exceeded their authority.

“Any guidance, in fact any rule-making, ultimately, should be subject to congressional review,” Mr. Toomey said.

This doesn't answer our question.

I vote you help us out by looking at whatever documentation Sen. Toomey filed to target the rule for rescission, which AFAIK should be in the public domain and contain his rationale. In the past, I've found the media... shall way say... "less than completely reliable"... in disclosing the full rationale for the passage or repeal of such rules. We want to be sure we're not being Fake News'd.

[billisonboard]

Apr 21, 2018 18:09:15 GMT -5 Virgil Showlion said:

... I vote you help us out by looking at whatever documentation Sen. Toomey filed to target the rule for rescission, ...

If you want to know a politician's rationalization for this, you should look it up yourself. I found this as good reason for the GOP top get rid of the whole thing. Ally to pay $98 million for car loan bias

Federal officials said that Detroit-based Ally Financial and Ally Bank charged higher interest rates from about 235,000 car loan borrowers who were Hispanic, African-American, and Asian/Pacific Islanders since April, 2011.

The Justice Department and the Consumer Financial Protection Bureau said an investigation into Ally's lending practices found that car dealers who arranged loans were allowed to mark up the interest rate over what would be justified by their credit profile.

The dealers and Ally split the additional interest payments. On average, the minority customers paid an additional $200 to $300 each over the life of the car loan.

[Deleted]

Apr 21, 2018 16:19:19 GMT -5 Virgil Showlion said:

Apr 21, 2018 9:29:09 GMT -5 billisonboard said:

"Minorities" don't default, individuals default.

(Using a technique I saw somewhere )

"Sir, we ran your credit and see you are eligible for an interest rate of 4.3%"

"That is great. Where do I sign?"

"Right here. Whoops, I didn't realize you were left handed. Left handed people default on loans at a higher rate so we will have to increase your interest rate to 5.3%."

"But all the work I did to raise my score?"

"Sorry Sir, maybe you should talk to all those people like you to get them to be more responsible."

(meanwhile)

Virgil: "That is great. Where do I sign?"

Insurer: "Right here. Whoops, I didn't realize you were male and age 21-35. That'll be $550 a month for your auto insurance, not $200 a month."

Virgil: "But I'm an individual! I've never been in an accident."

Insurer: "Sorry, sir. Maybe you should talk to all those people like you to get them to be more responsible."


So which is it? Are we a socialist society where everyone pays equally for the bravado of young male drivers and increased minority credit risk, or are we a capitalist society where young males bear the brunt of being young and male and minorities bear the brunt of being a minority?

I'd welcome passing my higher insurance costs onto women and older men.

From 18 to 25 I paid quite a bit more for basically identical insurance when compared to what my sisters paid... I also was in quite a bit LESS "insured person at fault" accidents than them.

"Why am I not outraged?", you might ask... Well... I'm not outraged because I understand that you can account for demographic trends, and typically, boys/young men are far more risk-taking drivers than their female counterparts.

[Virgil Showlion]

Apr 21, 2018 19:06:59 GMT -5 billisonboard said:

Apr 21, 2018 18:09:15 GMT -5 Virgil Showlion said:

... I vote you help us out by looking at whatever documentation Sen. Toomey filed to target the rule for rescission, ...

If you want to know a politician's rationalization for this, you should look it up yourself. I found this as good reason for the GOP top get rid of the whole thing. Ally to pay $98 million for car loan bias

Federal officials said that Detroit-based Ally Financial and Ally Bank charged higher interest rates from about 235,000 car loan borrowers who were Hispanic, African-American, and Asian/Pacific Islanders since April, 2011.

The Justice Department and the Consumer Financial Protection Bureau said an investigation into Ally's lending practices found that car dealers who arranged loans were allowed to mark up the interest rate over what would be justified by their credit profile.

The dealers and Ally split the additional interest payments. On average, the minority customers paid an additional $200 to $300 each over the life of the car loan.

The other side of the story, ibid.:

Federal officials said they are not alleging the discrimination was deliberate.

Ally issued a statement saying its dealers' contracts doesn't include information on a consumer's race or ethnicity, and that it doesn't believe its dealer network was deliberately discriminating.

"Regardless, Ally takes the assertions by the CFPB and DOJ very seriously and has agreed to the terms in the orders," it said.

...

The National Automobile Dealers Association denied that its members are engaged in any kind of discriminatory lending practices, which spokesman Bailey Wood term a "toxic allegation." He said that other studies have showed that dealers arrange loans at a lower interest rate than direct lenders, such as banks and credit unions. He questioned the investigation that the CFPB performed to determine that minority car buyers had been hurt.

"The CFPB continues to withhold the secret methodology it uses to determine whether unintentional discrimination has occurred," he said.

The CFPB's methodology is key. If they're merely running a multi-factor analysis on interest rates, factoring out credit score, and finding a residual correlation with race, this is explainable by the phenomenon I just described. Meaning the car dealers may well be conducting routine non-discriminatory business, yet being sued due to statistical realities beyond their control.

CNN states, "The Justice Department and the Consumer Financial Protection Bureau said an investigation into Ally's lending practices found that car dealers who arranged loans were allowed to mark up the interest rate over what would be justified by their credit profile."

The clause "allowed to mark up the interest rate" suggests something deliberate and malicious. It raises the question of how applications were flagged if dealer contracts contain no information on a consumer's race, especially in light of the fact that CFPB isn't alleging the act is deliberate. Combine this with an inscrutable methodology and Republican grumblings about "junk science", it's not a stretch to assume what CNN and the NYT (and possibly also the CFPB) are calling "allowed to mark up the interest rate" is the dealers' increased tendency to flag non-minority customers' applications with "give this guy a better rate", in the normal course of non-discriminatory business, due to the factors I previously identified.

Hence the dealers and insurers run to the Republicans, saying, "Look, we're being sued for giving better deals to customers on a loyalty and lower-credit-risk basis, and the CFPB's methodology doesn't care."

Is this what's happening? I don't know. I do know it's a plausible explanation based on the facts presented in the two articles, and that the Republicans are the good guys if it's indeed the case.

If you want to know a politician's rationalization for this, you should look it up yourself.

I'm not the one up in arms over the rescission of the rule. This is all an academic curiosity to me.

If my theory turns out to be correct, this issue would stand out as a prime example of how media outlets can report 90% of the facts with complete truthfulness, and yet by omission of that critical 10%, either deliberately or due to journalistic incompetence, lead the readership to a totally wrong conclusion.

[billisonboard]

Apr 22, 2018 7:54:12 GMT -5 Virgil Showlion said:

... I'm not the one up in arms over the rescission of the rule. This is all an academic curiosity to me.
...

It is certainly your privilege for this to just be an academic curiosity to you.

[Virgil Showlion]

Apr 22, 2018 8:52:06 GMT -5 billisonboard said:

Apr 22, 2018 7:54:12 GMT -5 Virgil Showlion said:

... I'm not the one up in arms over the rescission of the rule. This is all an academic curiosity to me.
...

It is certainly your privilege for this to just be an academic curiosity to you.

If it's something more to you, perhaps you ought to determine whether the Republicans are sticking it to minorities or doing the public a service here.

[billisonboard]

Apr 22, 2018 16:21:37 GMT -5 Virgil Showlion said:

Apr 22, 2018 8:52:06 GMT -5 billisonboard said:

It is certainly your privilege for this to just be an academic curiosity to you.

If it's something more to you, perhaps you ought to determine whether the Republicans are sticking it to minorities or doing the public a service here.

I find it interesting that you identify minorities as being apart from "the public". Does that mean "the public" the Republicans are doing the service for is us white folks?

[Virgil Showlion]

Apr 22, 2018 16:54:03 GMT -5 billisonboard said:

Apr 22, 2018 16:21:37 GMT -5 Virgil Showlion said:

If it's something more to you, perhaps you ought to determine whether the Republicans are sticking it to minorities or doing the public a service here.

I find it interesting that you identify minorities as being apart from "the public". Does that mean "the public" the Republicans are doing the service for is us white folks?

I'm part capitalist at heart. I believe it to be in the public interest for lenders to be able to offer lower rates to customers on the basis of greater income and collateral, to reward loyalty, and as an incentive to attract big accounts. In spite of its noble intentions, if the rate regulation we're discussing inadvertently penalizes lenders for doing these things, it is an encumbrance. A sufficiently great encumbrance works against the public good. A politician who removes an encumbrance working against the public good is performing a public service.

There are two other possibilities as well:

(1) The dealers are engaging in the same kind of discrimination as auto insurers. They don't bother to check income, collateral, loyalty, etc. on a customer-by-customer basis. However, having observed that minorities tend to perform more poorly in these regards on average, they offer this group higher rates. This I condone only if (i) checking the above factors on a case-by-case basis is unreasonably burdensome and (ii) the risk disparity between demographics is large (on the order of 300%), as I said before.

(2) The dealers are simply sticking it to minorities because they can. They're flagging minority loan applications for higher rates (or flagging non-minority applications for lower rates) for some reason other than the two reasons given above. This I do not condone. I may not necessarily condone regulations either, since no regulation comes without side effects, and market forces will always limit the magnitude of discrimination at some point. It depends entirely on the regulation.

You took your little shot at my indifference, and now you're race baiting. But if you haven't researched which of the above possibilities is really the case, what does this say about you? At best, you're as indifferent as I am.

[billisonboard]

Apr 21, 2018 8:57:35 GMT -5 Virgil Showlion said:

...

Several minorities have a higher rate of defaulting on loans. Associated costs are passed along to consumers in the form of fees, higher rates, etc. This repeal would appear to allow actuarial calculations to take race into account when assessing risk, meaning penalties are paid by the minority rather than distributed over the entire population.

...

Apr 22, 2018 19:10:11 GMT -5 Virgil Showlion said:

... and now you're race baiting. ...

I am discussing the race issues you have introduced.

[Virgil Showlion]

Apr 22, 2018 19:26:25 GMT -5 billisonboard said:

Apr 21, 2018 8:57:35 GMT -5 Virgil Showlion said:

...

Several minorities have a higher rate of defaulting on loans. Associated costs are passed along to consumers in the form of fees, higher rates, etc. This repeal would appear to allow actuarial calculations to take race into account when assessing risk, meaning penalties are paid by the minority rather than distributed over the entire population.

...

Apr 22, 2018 19:10:11 GMT -5 Virgil Showlion said:

... and now you're race baiting. ...

I am discussing the race issues you have introduced.

"I find it interesting that you identify minorities as being apart from 'the public'." was the accusation.

First of all, my statement "I do know [this theory I just spent a whole post describing] is a plausible explanation based on the facts presented in the two articles, and that the Republicans are the good guys if it's indeed the case," makes it perfectly clear which theory I'm referring to as "doing the public a service" when I ask "whether the Republicans are sticking it to minorities or doing the public a service" in the very next post.

Minorities aren't being discriminated against in this theory, hence: baseless accusation.

But let's say you assumed for no reason I was talking about the actuarial theory 8 posts earlier, and again consider: "I find it interesting that you identify minorities as being apart from 'the public'."

I made it clear in that post: "In my mind, the appropriateness of the measure depends on the disparity in risk. For example, if first-generation Somali immigrants have a 7.5% risk of default versus 2.5 for the general population--a 200% disparity-I have no qualms with passing the costs onto first-generation Somali immigrants. If the difference is marginal--2.5% vs. 2.7%, say--the bad outweighs the good. The greater population will just have to take one for the team."

Do I consider first-generation Somali immigrants not a part of the public? For this specific example (assuming the premise were true): yes. At least in the sense I consider them to be an extraordinarily risk-prone demographic as opposed to the not-extraordinarily-risk-prone complementary set.

Does this necessarily apply to first-generation Somali immigrants for other examples?: no.

Does this necessarily apply to other minorities, for default risk or any other example?: no.

Does this necessarily never apply to white people?: no.

Do the groupings matter in determining whether discrimination is a net public good?: no, provided they're sufficiently large.

Hence again, "you identify minorities as being apart from 'the public'": baseless accusation.

[billisonboard]

Okay

[Opti]

Virgil, since the car dealership usually gets loan info to the client in real time so it is not necessary to put the race on an application. Plus you have the fact that many people's names will telegraph that they might be Hispanic or Black.

[OldCoyote]

I am pretty sure the Credit Bureau and the banks already know what color you are.

I  was told by a friend who's SIL is a bill collector, when she calls on a debt, she already has all your bank info up on her computer screen, including what your bank balances are.

Checking one's color is probably on the next page.

[Virgil Showlion]

Apr 23, 2018 3:34:16 GMT -5 Opti said:

Virgil, since the car dealership usually gets loan info to the client in real time so it is not necessary to put the race on an application. Plus you have the fact that many people's names will telegraph that they might be Hispanic or Black.

It turns out to be irrelevant.

I read a bit deeper into the suit against Ally and confirmed the discrimination occurs at the level of the dealerships. The dealers have a 2.5% discretionary margin on financing rates. They send in a requested rate within the permissible range and Ally gives it to them. Ally is named in the suit because the CFPB/DoJ can't go after dealerships directly.

The NYT coverage of the story also makes it clear what the "fix" is: no discretionary margin on financing rates. Obviously. Since even if the different rates fairly reflect factors beyond the dealers' control, they're beyond the dealers' control. They can't magically erase correlations to race.

As I said in my very first post: capitalism versus socialism. And if socialism leaves dealers with no margins to work with legitimately (for all the reasons listed in Reply #8), socialism can take a flying hike.

[Opti]

Apr 23, 2018 7:52:15 GMT -5 Virgil Showlion said:

Apr 23, 2018 3:34:16 GMT -5 Opti said:

Virgil, since the car dealership usually gets loan info to the client in real time so it is not necessary to put the race on an application. Plus you have the fact that many people's names will telegraph that they might be Hispanic or Black.

It turns out to be irrelevant.

I read a bit deeper into the suit against Ally and confirmed the discrimination occurs at the level of the dealerships. The dealers have a 2.5% discretionary margin on financing rates. They send in a requested rate within the permissible range and Ally gives it to them. Ally is named in the suit because the CFPB/DoJ can't go after dealerships directly.

The NYT coverage of the story also makes it clear what the "fix" is: no discretionary margin on financing rates. Obviously. Since even if the different rates fairly reflect factors beyond the dealers' control, they're beyond the dealers' control. They can't magically erase correlations to race.

As I said in my very first post: capitalism versus socialism. And if socialism leaves dealers with no margins to work with legitimately (for all the reasons listed in Reply #8), socialism can take a flying hike.

Unbridled free market capitalism has caused exploitation in the past, hence various laws. Having laws does not make our system socialism anymore than not having unfettered capitalism means there is no capitalism left.

You think its capitalism which causes these people in the dealers which has them asking for bigger profits in loans in less liked groups instead of good old bias against those groups? Much of greed and exploitation occurs because the exploiters can take advantage of certain people easily. Its not because they need to, that they are doing it for a higher reason. Notice they listed Asian/Pacific Islanders too. Odds are their default rates are less than whites, but some people don't like them, so they took advantage of them when the opportunity arose.

[OldCoyote]

Many years ago I had a car loan with Valley Bank, For those of you in AZ a long time, You know that was a while back.

Any way I went in to pay the loan off a little early, I owed a little over $600. on it.

The bank said it was $1600 , no way.

I demand an audit!

I get a call, that it was ready,  I go to the bank, sign in.

The first banker reads my name, goes back to his desk picks up some paperwork, heads over to the dept. manager , She looks at me , goes into the bank manager, pushes the paperwork at her,
Let me point out that, In things like this, I never raise my voice, I never make threats, or use swear words, but they know that this not going to be poo pooed off.
So, here comes the bank manager, Invites me into her office, we, start with the audit, "here is where your loan started,  here is where you made your first payment, We are going to do this line by line.

First thing I said was What is this
$22,?? something charge here?
It was a kickback to the dealer, that's right the dealer gets a kickback from the bank!

A couple of lines down is a charge for a $1000. What is this?  Oh that's where you didn't have insurance! 
Me, I have always had insurance!
Manager, no you didn't!
End of this meeting.

Go dig up all of my insurance paper , Yea, I had insurance!
Back to the bank  OK they agreed that I had insurance, but it would take up to two weeks to get corrected!
Some how the manager said it was my fault that the bank had made the mistake. 

I have asked for audits on other things over the years, Every time I found mistakes in the favor of others.

[Virgil Showlion]

Apr 23, 2018 8:14:37 GMT -5 Opti said:

Apr 23, 2018 7:52:15 GMT -5 Virgil Showlion said:

It turns out to be irrelevant.

I read a bit deeper into the suit against Ally and confirmed the discrimination occurs at the level of the dealerships. The dealers have a 2.5% discretionary margin on financing rates. They send in a requested rate within the permissible range and Ally gives it to them. Ally is named in the suit because the CFPB/DoJ can't go after dealerships directly.

The NYT coverage of the story also makes it clear what the "fix" is: no discretionary margin on financing rates. Obviously. Since even if the different rates fairly reflect factors beyond the dealers' control, they're beyond the dealers' control. They can't magically erase correlations to race.

As I said in my very first post: capitalism versus socialism. And if socialism leaves dealers with no margins to work with legitimately (for all the reasons listed in Reply #8), socialism can take a flying hike.

Unbridled free market capitalism has caused exploitation in the past, hence various laws. Having laws does not make our system socialism anymore than not having unfettered capitalism means there is no capitalism left.

You think its capitalism which causes these people in the dealers which has them asking for bigger profits in loans in less liked groups instead of good old bias against those groups? Much of greed and exploitation occurs because the exploiters can take advantage of certain people easily. Its not because they need to, that they are doing it for a higher reason. Notice they listed Asian/Pacific Islanders too. Odds are their default rates are less than whites, but some people don't like them, so they took advantage of them when the opportunity arose.

You misunderstand me. I'm a socialist at heart on a lot of issues.

For this particular issue, and specifically concerning the "no margin" proposed "fix": no mas.

Does this enable unethical dealers to discriminate for no good reason? Yes. Greater freedom always comes at the cost of less security. But it's a worthwhile trade-off in this case.

You'll note that the margin is capped at 2.5%, meaning even the status quo isn't unfettered capitalism. A purely capitalistic system would have no cap on the margin except that negotiated by the bank and the dealer.

[billisonboard]

Individuals within a pool of credit scores are charged an interest rate based on the percentage likelihood the collective members of that pool will default. What is being discussed here is the appropriateness of a surcharge added to that rate based on the percentage likelihood the collective members of that individual's race will default. Granted there are factors, such as unforseeable medical situations, which can negatively impact an individual's score. However, an individual's personal actions are the main reason for their score. I don't think it is reasonable to tack on a surcharge based on a circumstance of birth factor.

[Virgil Showlion]

Apr 23, 2018 8:50:55 GMT -5 billisonboard said:

Individuals within a pool of credit scores are charged an interest rate based on the percentage likelihood the collective members of that pool will default. What is being discussed here is the appropriateness of a surcharge added to that rate based on the percentage likelihood the collective members of that individual's race will default. Granted there are factors, such as unforseeable medical situations, which can negatively impact an individual's score. However, an individual's personal actions are the main reason for their score. I don't think it is reasonable to tack on a surcharge based on a circumstance of birth factor.

This is (as I call it) the "actuarial theory", but it's not the only theory. The second of my three theories doesn't involve discrimination based on collective risk.

In the second theory, think of the surcharge as a "guaranteed unless...". As soon as anyone walks in the door, their markup is automatically 2.5% above what their credit score would suggest.

They buy a car, and start negotiating financing.

"OK, Mr. Billis, I can offer you a financing rate of (x+2.5)%."
"Wow. You know, this is the third car we've bought from you..."
"You're absolutely right. I see that here in your file. How about this: just for you, because you're such a good customer, I'll knock off 1%. You'll get a rate of (x+1.5)%. How does that sound?"
"Better. But it's still really high."
"It's the best I can do, I'm afraid."
"You know, I'm an architect pulling in $10K a month. I can easily go elsewhere for this loan."
"Well, if you're willing to provide an income statement, I can probably get my boss to agree to (x+0.5)%. But that's the absolute best I can do, because it means there's literally no chance you'll ever miss a payment."
"I can live with (x+0.5)%."
"Good. Great. I'll confirm with my boss and we'll lock it in."

Is Mr. Billis white? Non-white? Who knows. He's getting a good deal because of his specific customer profile as it relates to risk, loyalty, etc.

Even so, if there happen to be more whites than non-whites sharing Mr. Billis' advantageous circumstances, any study looking at correlation between rates and race will find one. The CFPB can't/won't establish the specific mechanisms to explain the correlation, and hence they fall back to "We don't know if it's deliberate. We do know we want Ally to put pressure on dealers to make the correlation disappear."

I trust you'll agree with me that if the disparity in rates is indeed due to this kind of incidental correlation, and the dealers are simply doing what dealers do to sweeten deals without caring one whit about customers' race, punishing them for it is unfair, anti-competitive, and harmful to the public interest.

[billisonboard]

Apr 23, 2018 9:27:54 GMT -5 Virgil Showlion said:

...

A grand competing theory to your earlier explanation that this is a positive change in regulation since it allows for a race based surcharge.

[Virgil Showlion]

Apr 23, 2018 9:55:28 GMT -5 billisonboard said:

Apr 23, 2018 9:27:54 GMT -5 Virgil Showlion said:

...

A grand competing theory to your earlier explanation that this is a positive change in regulation since it allows for a race based surcharge.

Indeed. But again I emphasize re the earlier theory: a "race-based surcharge" is only the lesser evil if the risk disparity is exceptionally large.

In this case, with dealers having access to credit scores, it's likely impossible for the risk disparity to be exceptionally large. While "whites with a FICO rating of 750" and "non-whites with a FICO rating of 750" may have a statistically significant difference in their collective risk of default (due to factors the credit score doesn't measure), if it's a 200%+ disparity, I'll pet a snow leopard.

Hence if this kind of surcharge was the only thing the regulation prevented, repealing it would not be a positive change in my books.

Out of the three theories in Reply #15, only the first (unnumbered) theory makes the repeal a public service.

[billisonboard]

Apr 23, 2018 15:06:47 GMT -5 Virgil Showlion said:

... Indeed. But again I emphasize re the earlier theory: a "race-based surcharge" is only the lesser evil if the risk disparity is exceptionally large.
...

I understand that you find it acceptable that all the black folk in the country be held responsible for the behavior of all the other black folk in the country because, you know, they are all black folk. I understand that you find it unacceptable that you would face anything other than minor consequence because of the behavior of some of those black folk because, you know, you aren't one of those black folk.

I, on the other hand, feel that interest rates offered to individuals should be based on the credit scores/reliability of those individuals and that the different groupings of individuals with different scores/reliability should be charged at a rate that covers that group's cost of default without impacting the other groupings. If institutions fail to adequately charge to the point that they are aren't covering their costs, they should increase the rates based on the credit scores/reliability of individuals, not factors such as shoe size, innie or outie belly button, or race.