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Ally to pay $98 mln over U.S. auto lending bias charges

Dec 20 (Reuters) - Ally Financial Inc agreed to pay $98 million to settle allegations by federal regulators that it discriminated in auto lending by charging minority borrowers higher interest rates than white borrowers.

The settlement, announced on Friday by the U.S. Department of Justice and the U.S. Consumer Financial Protection Bureau, is the government's largest concerning auto lending.

It calls for Ally to pay $80 million in compensation to victims of the discrimination, and $18 million to the CFPB's civil penalty fund. Ally must also improve its oversight and compliance systems.

The accord resolves allegations that starting in April 2011, Ally imposed interest rates that were 0.20 percent to 0.29 percent higher on about 235,000 Hispanic, African-American and Asian/Pacific Islander borrowers because of their race or national origin, not their creditworthiness or other objective criteria.

Regulators said this caused affected borrowers to pay on average $200 to $300 extra over the terms of their loans.

"By requiring Ally to provide refunds to those who are overcharged because of their race or national origin, this agreement will ensure relief for Americans who are victimized," Attorney General Eric Holder said in a statement.

The regulators did not accuse Ally of intentional discrimination, but CFPB Director Richard Cordray said on a conference call that it "makes no practical difference" to consumers whether Ally had such intent.

In a statement, Ally said borrowers' race and ethnicity are not factors in auto loan pricing, and that it does not engage in or condone discrimination. It expects to take a $98 million charge in the current quarter.

The government owns roughly 64 percent of Ally.

Friday's accord is the first joint fair-lending enforcement action between the Justice Department and the CFPB, an agency established under the 2010 Dodd-Frank financial reforms.