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LOS ANGELES (CNS) — A Torrance-based arm of Honda will pay $25 million to settle claims it discriminated against minority buyers by overcharging them for auto loans, federal regulators said.

American Honda Finance Corp. violated fair-lending laws by allowing dealers to charge higher interest rates on loans sought by black, Hispanic and Asian borrowers, according to the settlement with the U.S. Department of Justice announced Tuesday, July 14.

According to the Justice Department, for the past four years, the average black borrower paid about $250 more for the loan than a white borrower, while Hispanics paid $200 more and Asian/Pacific Islander borrowers paid $150 more than whites during the term of the loan.

Honda insisted in a statement that it “strongly opposes any form of discrimination” and believes in “the importance of fair lending.”

In addition to $24 million in payments for past conduct, Honda will pay $1 million to begin a consumer financial education program targeting the populations that were overcharged, prosecutors said.

The case was handled by prosecutors in Washington, D.C., with the U.S. Attorney’s Office in Los Angeles providing support.

 “We commend Honda for its leadership in agreeing to impose lower caps on discretionary mark-ups and for its commitment to treating all of its customers fairly without regard to race or national origin,” said Vanita Gupta, head of the Justice Department’s Civil Rights Division.

“We recognize that dealerships perform a valuable service in connecting customers with lenders and that they should be fairly compensated for that service. We hope that Honda’s leadership will spur the rest of the industry to constrain dealer mark-up to address discriminatory pricing,” she said.

The settlement resolves claims by the government and the Consumer Financial Protection Bureau that Honda charged borrowers higher interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk.

The Equal Credit Opportunity Act prohibits such discrimination in all forms of lending, including auto lending.

Honda’s settlement, which is subject to court approval, was filed in Los Angeles in conjunction with the Justice Department complaint.

“The CFPB is committed to creating a fair marketplace for all consumers, and other auto lenders should take note of today’s action,” said Richard Cordray, the bureau’s director. “Honda’s proactive decision to move to a new pricing and compensation system demonstrates industry leadership and represents a significant step towards protecting consumers from discrimination.”