Despite their attempts to negotiate pricing just as much, if notmore than white consumers, Hispanic and black car buyers stillreceive higher interest rates on loans financed throughdealers.

That finding was revealed in a new report, Non-Negotiable:Negotiation Doesn't Help African Americans and Latinos onDealer-Financed Car Loans, from the Center for ResponsibleLending, a Durham, N.C.-based nonprofit research and policyorganization.

The CRL said it gathered data for the report by conducting atelephone survey of 946 consumers who had purchased a car at adealership in the prior six years.

Thirty-nine percent of Latinos and 32% of African Americansreported negotiating their interest rate, compared to 22% of whitecar buyers – yet people of color received worse pricing, accordingto the CRL report. Minorities also received higher interest ratescompared to white buyers who did not attempt to negotiate atall.

More borrowers of color reported receiving misleadinginformation about their loans from car dealers, the datashowed.

African-Americans and Latinos were nearly twice as likely to besold multiple add-on products as white consumers, according to thereport. Add-on products such as various kinds of warranty andinsurance coverage were sold at the dealership's financing office,often with significant price markups.

Dealers sold African-Americans and Latinos multiple add-onsapproximately 30% and 27% of the time, respectively, compared with16% of the time for whites, the findings noted. Multiple add-onswere also associated with greater chances of delinquency andtherefore create a greater risk of repossession, the CRL reportread.

The CRL said similar to the disparities found in mortgage yieldspread premiums, previous research has also found racial and ethnicdisparities when borrowers financed their car loans at thedealership rather than directly from a bank or credit union.

Using data provided through class action litigation, a 2006Vanderbilt University study found that borrowers of color were morelikely to receive an interest rate markup when financing a carthrough the dealer, and that the rate is typically increased atlarger amounts, than for similarly situated white borrowers.

The Vanderbilt study did a loan-level analysis of five majorauto finance companies that indicated 54.6% of African-Americansreceived an interest rate markup, compared to 30.6% of whites.

Moreover, African-Americans on average paid over twice theamount of rate markup ($742) compared with the average markup paidby whites ($315). Latinos also paid higher rate markups thanwhites, although not as high as those paid byAfrican-Americans.

Lenders involved in the class action lawsuits settled out ofcourt, and instituted temporary interest rate markup caps ofbetween two and three percentage points, the first of which startedin 2003, the CRL said. Even with the last of the markup capsexpiring in early 2010, auto industry representatives claimed thatthe caps have been generally accepted as a best practice with mostlenders, which should limit discriminatory conduct.

The CRL report comes as the ConsumerFinancial Protection Bureau has vowed to crack down ondiscriminatory practices involving auto loans at dealerships.

In March 2013, the CFPB confirmed that some indirect auto lenders have policiesthat allow auto dealers to mark up lender-established buy rates andcompensate dealers for those markups, which are referred to asmarkup and compensation policies.

The CFPB said because of the incentives these policies create,and the discretion they permit, there is a significant risk thatthey will result in pricing disparities on the basis of race,national origin and potentially other prohibited bases.

In a bulletin on the matter released on March 21,the CFPB said the Equal Credit Opportunity Act makes it illegal fora creditor to discriminate in any aspect of a credit transactionbecause of race, color, religion, national origin, sex, maritalstatus, age, receipt of income from any public assistance programor the exercise, in good faith, of a right under the ConsumerCredit Protection Act.

The CFPB recommended that indirect auto lenders ensure that theyare operating in compliance with fair lending laws as applied todealer markup and compensation policies including monitoring andaddressing the effects of markup policies as part of a robust fairlending compliance program and eliminating dealer discretion tomarkup buy rates, instead compensating dealers with flat fees.

Meanwhile, in its report, the CRL also called for rulesprohibiting dealer compensation that varies based on the interestrate or other material terms of the loan, other than the loan'sprincipal balance. Car dealers should be paid a flat fee by lendersfor sourcing loans, not receive more for being able to convinceunwary borrowers to pay a higher rate than they qualify for,according to the report.

Likewise, to address the findings that borrowers of color payfor more add-on products, the CRL recommended rules that requiredealers to disclose the actual costs of every add-on product soldduring the financing process and to reveal the cost of the car withand without add-on products. Regulation should also prohibitdealers from representing that the buyer is required to purchaseancillary products in order to obtain financing.