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Davis Signs Fair Lending Bill
The New York Times
July 16, 2003
Gov. Gray Davis of California has signed into law a bill to curb outsize interest rates that car dealers sometimes charge minority customers. The new statute, say consumer groups that follow the issue, is the nation's first to take aim at discriminatory lending that can result from a practice known as the dealer markup. In a dealer markup, car dealers raise interest rates above the rates they are quoted by auto lending giants or other big financing companies. The dealers pocket the proceeds of the difference, or split them with the financing companies.
Large numbers of car buyers around the country pay thousands of dollars extra because of the dealer markup, which is invisible to typical buyers and little understood by them. Though the markup is often paid by car buyers of all ethnicities, it can be most pronounced for minorities, in which case it runs afoul of federal law that prohibits discriminatory lending practices. "Many consumers are deceived into paying excessively high interest rates when purchasing a car, especially African-Americans and Latinos," Governor Davis, who signed the new statute on Monday night, said in a statement issued yesterday.
To learn about litigation against auto finance companies for alleging charging minority customers excessive interest rates on auto loans, click here.