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Charge of racism in auto loans is clunker

Legal Vultures Use Race as Cover for Greed

Here goes the New York Times again, striving tirelessly to unmask America's rampant hooded racists who prey on minorities. How would we "people of color" cope without them?

In a July 4 front-page treatise headlined "Review of Nissan Car Loans Finds That Blacks Pay More," Times reporter Diana B. Henriques details a "statistical study" of car loans arranged through Nissan dealers. The report showed that "black customers in 33 states consistently paid more than white customers, regardless of their credit histories."

The racial borrowing gap was largest in Maryland and Wisconsin, where the average finance charge paid by blacks was about $800 higher than whites paid. The Times also noted that, on average, blacks paid $245 more than whites in Connecticut, $339 more in New Jersey and $405 more in New York. In Texas, the black-white gap was $364; in Florida, it was $533.

Legal vultures call this outcome a "disparate impact." In our victim-centered society, disparate impact automatically means discrimination-whether or not it was intended-and discrimination means dollars. Disparate-impact studies serve as highoctane fuel for a greedy fleet of civil-rights lawsuits. Once the numbers are cooked and disparate impact is shown, the heavy legal burden of disproving facial discrimination falls on the defendant. (For that, blame the 1991 Civil Rights Act-one of the most disastrous bipartisan legacies of former President George Herbert Walker Bush.) Didn't Know Race Of Alleged Victims

Plaintiffs have mounted class-action challenges to big auto lenders in at least five states. Sensational media coverage of the issue conjures up nefarious images of Ku Klux Klan accountants at Nissan, Toyota, Ford, DaimlerChrysler and General Motors sorting loan applications into color-coded piles-just like affirmative-action bureaucrats-and wielding special mark-up charts according to race.

"Based on our statistical evidence, blacks were systematically and pervasively charged more than similarly situated whites," Gary Klein, senior lawyer with the National Consumer Law Center in Boston, said last fall when news of the lawsuits broke. Will Klein sue on behalf.of whites if the data show-as they did in the case of mortgage lending-that Asian-Americans 11 systematically" get better deals than whites? Don't hold your breath.

More to the point, there's a crucial fact buried by the supposedly damning blackwhite statistics: The defendants in these cases had absolutely no clue about the plaintiffs' skin color.

Let me repeat that. The auto lenders who are being sued for racial discrimination did not know the race of their alleged victims. The Times even acknowledges that fact off-handedly: "None of the companies are accused of racial bias-indeed, both sides agree that the giant lenders do not even know the race of the customers whose cars they finance." Lenders like the Nissan Motor loan unit allow car dealers to add a dealer markup to the interest rate Nissan sets for customers based on their income and credit history. That becomes the rate quoted to the customer.

Only the car dealers who negotiated face to face with customers knew their race when they set the finance rates. Yet, the plaintiffs-interested only in digging the deepest pockets-have no plans to sue individual dealers. Proponents of this disparate impact juggernaut shrug off all other possible explanations for the lending disparities.

But the fact is, blacks as a group are poorer and constitute higher credit risks than whites. Government data from last year showed that 48% of blacks have bad credit ratings, compared to 27% of whites. Lower downpayments usually mean higher rates. Moreover, lenders tend to impose higher markups on longer loans; blacks tend to borrow for slightly longer terms than whites. Also, the lenders usually place lower markup caps on new-car loans, which whites are more likely to seek than blacks.

No one argues that car dealers can sometimes be a shady lot. There even may be sporadic cases of clear-cut racial discrimination by some of the car dealers. But the notion of manufactured, systemic racism by auto lenders, a myth perpetuated by the social engineers at the New York Times, absolves minorities of any responsibility to be informed and vigilant consumers.

These perfectly rational business practices aren't about black and white. They're concerned with only one color: almighty green.

Mrs. Malkin, a nationally syndicated columnist, is founder of the website Poro,atch.