Fifth Third Bank settles charges of discriminatory lending practices

The bureau reached a settlement deal requiring Fifth Third — Ohio’s second largest bank by deposits held — to pay $18 million to minority auto loan customers.

In a separate issue, the Cincinnati-based regional bank also engaged in deceptive marketing practices to credit card customers, according to the CFPB.

The Consumer Financial Protection Bureau — a federal agency created by industry regulation following the financial crisis and recession — and the United States Department of Justice announced Monday joint action that requires Fifth Third to change the way it prices third-party auto loans to reduce the risks of discrimination.

According to the federal government, Fifth Third violated the Equal Credit Opportunity Act by charging minority customers higher rates for their auto loans regardless of their creditworthiness, according to investigators.

Thousands of harmed customers paid $200 more on average for their auto loans.

As a result, Fifth Third will pay $18 million into a settlement fund that will be paid out to affected borrowers whose auto loans were financed by Fifth Third between January 2010 and September 2015, according to the financial protection bureau. Fifth Third will also pay the cost of administering the settlement fund.

The bank, which has a 12-state footprint, has agreed to limit dealer markups to 1.25 percent for loans of 60 months or less; and to 1 percent for loans greater than 60 months, according to the justice department.

“The orders do not relate to auto loans Fifth Third makes directly with customers, but instead involve retail installment contracts originated by auto dealers and then purchased by Fifth Third,” reads a written statement provided by the bank.

“In reaching this settlement, Fifth Third stands firm in its conviction that we have treated and will continue to treat our customers in a fair, open and honest manner. Fifth Third strongly opposes any type of discrimination and has, for many years, monitored for and taken steps to avoid any potential discrimination in its auto finance business, as well as all other areas in which we interact with consumers.”

The consumer watchdog also announced Monday a second, separate action against Fifth Third for deceptive marketing practices the bank has already ceased.

Fifth Third was ordered to pay $3 million to credit card customers.

From 2007 through early 2013, bank telemarketers sold customers in phone calls and online a debt protection credit card add-on product. The product promised to allow enrolled cardholders to request cancellation of credit card payments if they experienced hardships such as job loss, disability and hospitalization, according to the bureau. However, not all cardholders that agreed to receive information about the product were told they were enrolled in the program and would be charged a fee.

This is the 11th credit card add-on enforcement action taken against companies for illegal practices in the marketing or administration of these types of products and services, according to the bureau.

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