March 16, 2005 5:53 PM ET

By GARY TANNER

NASHVILLE, Tenn. (AP) - A federal judge said Wednesday that the plaintiffs in a lawsuit had proved that a lending affiliate of the Ford Motor Co. discriminated against black customers by charging them higher rates on car loans. But the judge gave the two sides another 30 days to come up with a plan to end the practice and settle the case.

After a two-week trial, U.S. District Court Judge Aleta Trauger announced from the bench that she would rule against Primus Automotive Financial Services, a unit of the Ford Motor Credit Corp.

But before issuing a final ruling, she asked both sides to negotiate for 30 days to draft a proposal on how to end the discrimination and said both sides could still agree to settle the case.

"What I have decided is that the plaintiffs have proved their case and that they will win in my decision," Trauger said.

She said by agreeing to negotiate, she said the defendants would not give up their right to appeal a final decision.

"I am of the opinion that courts ought not to overly intrude and tinker in all the details of something like this. I would much prefer that I get a proposal from the parties here," Trauger said. "However, if I am put to it, I will decide how I will structure the remedy in this case."

The lawsuit lists 11 named plaintiffs, but attorneys said thousands of black customers were discriminated against and are included in the class. Attorneys said they were unfairly charged hundreds of thousands of dollars more than they should have been on car loans.

(more at the link)
http://news.moneycentral.msn.com/tic...21&Symbol=US:F

 

Yeah, I am sure that they sat down in a big circle and plotted how to extract more money from blacks. I know we have done that at every company I have ever worked for. They just have to make sure all the blacks that work there are off during the plot sessions. I am sick of crap like this. Who really thinks that white people do this? Get real.

 

I'm not sure if you're being sarcastic or not, but if you aren't, you're in dream world if you think there isn't discrimination against blacks.

 

... and women
... and old people
... and young people
... and poor people
... and handicaps
... and...................................

 

Exactly... and you can add white males to the list because everybody tries to compensate for the above. Sucks they took those peoples money, and i know its not the only case, but i wonder what the income of those people was like and what kind of car they were buying. Might tell you something.

 

I heard this on the radio today. Thing is I have not heard anything that demostrates the practice was solely or even partly due to race.

Yes blacks are also sometimes charged more for home mortgages, but if you control for net worth and credit rating it turns out blacks get the same mortgage rates as whites with equal financial situations.

It just so happens that blacks as a general rule (not an absolute) have higher debt/income loads and usually have lower net worth.

 

I'm not surprised by this at all. In economics, it's called second degree price discrimination.

Consider this example:

Group A is a low risk group on making car payments. Therefore rate x% per year is acceptable to make so much money on average on the car.

Group B is a high risk group on making car payments. Therefore because theu have a higher risk of defaulting or not missing payments, you will require an interest rate higher than group A's x% per year.

With the higher interest rate combined with the higher risk of default, you will on average make the same amount on the same car as you would with a group A customer. If they were forced to charge x% for group B instead, then they would in effect be making fewer expected profits than they would if they were to choose the higher interest rate. Firms, therefore, will attempt to charge higher rates wherever they can and can get away with it. If they figure that blacks are a higher risk group, then they will try to charge them higher rates than they would other people.

Ever notice if you're a low risk credit card holder, then you get great rates while if you are terrible at paying your bills you get really high interest rates? Same thing.