Two class-action lawsuits filed in Nashville, Tenn., against two of the United States' most prominent automobile finance companies have opened a critical new battlefront in government efforts to combat racial discrimination in the consumer credit markets.
The cases, filed under seal two years ago but recently unsealed on motions by the New York Times and the ABC News program "20/20," accuse General Motors Acceptance Corp. and Nissan Motor Acceptance Corp. of participating in lending arrangements with car dealers that have resulted in blacks paying higher finance charges than whites on dealer-arranged loans for buying cars.
Both companies have denied that their finance charges are discriminatory, saying that the statistical studies on which the plaintiffs rely are profoundly flawed.
They also assert that the interest rates paid on the loans are the results of private negotiations between consumers and car dealers, who profit directly from the higher rates. So the financing companies say they should not be held responsible for any discriminatory behavior involved in arranging the loans.
But their defense is drawing fire from the Justice Department, which has intervened in one of the cases on the plaintiffs' side. The department argues that lenders like Nissan Motor Acceptance and General Motors Acceptance should indeed be held responsible if the dealers who originate their car loans are violating federal fair-lending laws.
With its move, the government has raised the hopes of consumer advocates, who say the cases may produce supportive rulings and fresh data that can be used to combat racial discrimination elsewhere in the marketplace.
The government's stance has also put the once-obscure cases on the radar of the nation's giant consumer-credit industry. The American Financial Services Association, which represents the biggest consumer lenders in the country, has entered the cases in support of the defendants.
And the cases are clearly significant for the companies involved. Nissan Motor Acceptance, in a recent appeal of the trial judge's refusal to dismiss the case, noted that the plaintiffs were seeking compensatory damages of at least $100 million, "an amount that would cripple NMAC."
The plaintiffs in the cases are three black Nashville residents, Robert and Betty Cason, who are suing Nissan Acceptance, and Addie Coleman, who is suing General Motors Acceptance. They are represented by two Nashville lawyers, Clinton W. Watkins and Michael E. Terry, with backing from the National Consumer Law Center in Boston and the New York law firm of Bernstein Litowitz Berger & Grossman.
