Santander Consumer Lending Practices Draw Fire From AFL-CIO
(Bloomberg) -- The largest U.S. labor federation is calling on Santander Consumer USA Holdings Inc. to end its practice of allowing car dealers to add interest to a vehicle loan unrelated to the borrower’s creditworthiness.
A group of organizations including the AFL-CIO and the Committee for Better Banks said it plans to submit a letter to Chairman William Rainer and Chief Executive Officer Scott Powell at Santander Consumer’s annual shareholder meeting Tuesday. They say the company should end dealer markups to prevent racial discrimination in lending. The industry-wide practice has drawn scrutiny from the Consumer Financial Protection Bureau.
“In addition to harming consumers, the racially disparate impact of indirect vehicle lending creates risks to the company’s reputation and exposes the company to potential legal liability,” the groups said in a draft letter provided to Bloomberg News.
Santander Consumer is a Dallas-based auto lender controlled by Banco Santander SA, the Spanish bank. The U.S. company’s board has said it is committed to complying with the Equal Credit Opportunity Act.
“Santander Consumer has had a fair lending program in place for many years,” company spokeswoman Raschelle Burton said in an emailed statement. “We continually review transactions and processes to prevent disparate impact, including dealer participation, which is a common industry mechanism for compensating dealers for their role in facilitating the financing transaction.”
The letter urges Santander Consumer to take steps including disclosing vehicle loan data by race and creating a stakeholder advisory group. The recommendations go beyond an AFL-CIO shareholder proposal that the company prepare a report on racial discrimination risks in auto lending and prevention steps it has taken. This is the AFL-CIO’s latest move in an effort to drive financial companies to root out practices the labor federation views as hurting working families.
Santander Consumer’s board recommended that shareholders vote against the proposal, saying in its proxy that such a report is “unnecessary and duplicative” because the company already makes significant disclosures.
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