House Democrats who want to crack down on discrimination in auto-lending and insurance are headed for a showdown with Republicans unwilling to override state regulations they say have worked well.
Americans owe $1.2 trillion for auto loans, a category surpassed only by mortgages and student debt, and Democrats cited numerous studies showing that African Americans and Hispanics paid higher interest rates and insurance premiums during a Wednesday hearing of a House Financial Services subcommittee .
“We owe it to ourselves as a country to make sure every person is treated fairly when making an automobile purchase,” said Rep. Al Green, D-Texas, who is chairman of the subcommittee. “We have the ability and the power and the authority in Congress to do this. The question is, ‘Do we have the will to make a difference for people who are in need of a car, probably not making as much money as members of Congress, but who dearly need the opportunity to have this necessity so they can get to and from their jobs?’”
According to a 2018 study from the National Fair Housing Alliance, non-white vehicle buyers who were more qualified than white buyers received costlier loans 62.5% of the time. A 2015 study from the Consumer Federation of America, meanwhile, found that a driver living in a predominantly African American neighborhood could expect to pay premiums 70% higher than similar drivers in other neighborhoods .
Democrats took particular umbrage with the use of non-driving factors such as location, gender, and credit score in determining insurance rates. Three states — California, Hawaii, and Massachusetts — bar the use of credit scores and gender in setting rates, while four others — Pennsylvania, North Carolina, Montana, and Michigan — prohibit the use of gender.
Rep. Rashida Tlaib, D-Mich., described a U.S. service member who struggled to secure affordable car insurance because credit score was used as a factor. “The use of non-driving factors is such a really dangerous loophole that we on the federal level have a responsibility to push back against,” she said.
Tlaib has not been shy in her desire to crack down on the insurance industry, particularly since her state has the most expensive rates, according to a study from Insure.com. In March, the freshman congresswoman introduced legislation that would outlaw the use of credit history in auto insurance rates.
But Republicans, while adamant that discrimination is unacceptable, are wary of federal intervention. Under the current regime, states are the primary regulators of insurance companies.
“Government and regulation work best the closer they are to the parties being governed and regulated,” said Rep. John Rose, R-Tenn. “The insurance industry is one of the few success stories in that it hasn’t been swallowed whole by Washington. “We’ve been regulating insurance at the state level for over 150 years now, and it’s a system that works for consumers in terms of accessibility and affordability.”
Imposing federal mandates on the auto insurance industry might push up costs for drivers, they warned.
“I see no reason for Congress to supersede, in my case, North Carolina in regulating my state’s insurance market,” said Rep. Ted Budd, R-N.C. “I also see no reason why my constituents should be forced to subsidize Michigan or any other states for their seriously flawed state insurance laws.”
