The New York Department of Financial Services has Superintendent of Financial Services announced that Rhinebeck Bank has agreed to a $950,000 settlement for violating the state”™s fair lending law while engaged in indirect automobile lending and will provide restitution to eligible impacted borrowers.
In a press statement, the department said that its investigation Rhinebeck found practices that resulted in minority borrowers paying higher interest rates than non-Hispanic white borrowers for their automobile loans, without regard to their creditworthiness. Along with the financial penalty, Rhinebeck agreed to provide restitution to eligible impacted borrowers dating back to Jan. 1, 2017, and has agreed “to undertake significant remediation efforts to increase its monitoring of the dealers participating in its indirect automobile lending program to prevent discriminatory dealer markups in the future.”
For its part, the bank issued a statement that claimed while it “does not agree with the findings and denies the allegations, it agreed to a settlement so as not to engage in a lengthy and costly legal challenge.”
“This settlement reflects a striking departure by DFS from the current approach of virtually every federal and state banking regulator and enforcement agency on fair lending cases involving dealer reserve,” said Rhinebeck Bank President and CEO Michael J. Quinn. “Dealers, not banks, determine how much markup to charge customers. Banks do not know the racial or ethnic characteristics of borrowers before a loan is originated. In fact, banks are prohibited by law from ever asking for that information, which means the DFS action is based on allegations where the affected customers are only presumed to be members of a particular race or ethnicity, based on their last name and geographic location, as a proxy for those borrower characteristics.”
