Discriminatory Accusations Against Nissan Based On Faulty Research
24 October 2000
Discriminatory Accusations Against Nissan Motor Acceptance Corporation Based On Faulty Research
Study Overlooks Most Important Variable - Credit Worthiness
CARSON, Calif., Oct. 23 Today, Nissan Motor Acceptance
Corporation (NMAC) vigorously defended its fair lending history and challenged
claims of discriminatory practices brought against it by a group of trial
lawyers.
The Plaintiffs allege that NMAC's business policies allowed Nissan dealers
to charge higher finance fees to African American customers than white
customers in violation of the Federal Equal Credit Opportunity Act (ECOA).
Research conducted on behalf of the Plaintiffs by Dr. Debby A. Lindsey
analyzed the lending practices of all African-American and white NMAC
customers in Tennessee in an effort to demonstrate racial bias on the part of
NMAC. However the research did not compare the most relevant issue when
comparing lending practices of the two groups -- credit worthiness.
"The statistical information submitted by the Plaintiffs' counsel, upon
which they base their lawsuit, is inaccurate and provides no factual data
showing a disparate impact on African-Americans," said Anne Fortney, NMAC's
outside legal counsel. "It is inappropriate and unfair to base claims of
discriminatory practices on such analysis."
NMAC enlisted economist Dr. Harold Black, Vanderbilt University and
statistical analyst Dr. Janet Thornton, Economic Research Services to analyze
the Plaintiffs' research. They found numerous inaccuracies in Dr. Lindsey's
report.
"In effect, the Plaintiffs' study compares apples and oranges," said Dr.
Janet Thornton, Economic Research Services. "Their research inappropriately
assumed that the contracts were for African-Americans and white-Americans who
had similar credit ratings. This was not the case. They also did not
consider any of the other factors that are actually used to determine the cost
of credit."
The actual "cost of credit" in an auto finance contract is determined by
several factors, including the consumer's relative credit-worthiness, the type
of vehicle purchased, whether the vehicle is new or used, the length of the
contract, the cost of the vehicle, special warranties or other "add-ons," the
value of an trade-in and the amount of any other down payment. Determining
the cost of credit to a consumer by this type of non-biased, financial
risk-related analysis is a legal, practical and necessary lending practice.
This cost of credit cannot be expressed as merely a percentage amount,
sometimes called an Annual Percent Rate. The Plaintiffs' research only
considered the contract dollar cost of credit for each customer, with no
analysis of any other fact that could cause two customers to have different
actual costs of credit.
"The most important variable to be considered in any financing contract is
the applicant's credit worthiness and the Plaintiff in this case did not have
good credit," added Fortney. "The fact is Ms. Carson's loan was refused by
three other creditors. If NMAC had not purchased the contract, in all
likelihood she would have received an even higher rate from a sub-prime
lender."
NMAC does not loan money directly to consumers, and in many states it is
prohibited from doing so. Similar to other finance companies, NMAC acquires
loans by purchasing them from independent automobile dealers. Automobile
dealers make these loans to their customers, typically conditioned upon the
dealer's ability to sell the loan to one of their financing sources. No
Nissan dealer is required to sell any loan or any minimum number of loans to
NMAC. Therefore, NMAC has no ability to control the finance charge that any
customer will pay. If NMAC decides not to buy a loan with a certain finance
charge on it, the dealer can still sell that same loan to a different finance
source. Therefore, the plaintiffs' allegations that NMAC or any other finance
source can control the amount of finance charges that a dealer's customer will
pay is false.