Warren Buffett said Monday that his mobile-home firm that earned record profits last year does not charge minority customers higher rates than whites but acknowledged that some employees at Clayton Homes may not always have followed consumer-protection rules.
In a December investigation about the practices of Clayton Homes, reporters from The Seattle Times and BuzzFeed News analyzed federal loan data to show how the company charges minorities substantially higher rates. Compared to its peers in the industry, Clayton’s internal lending division, Vanderbilt Mortgage, had the largest gap.
Buffett did not address that issue in his annual Berkshire Hathaway shareholder letter, published over the weekend, but CNBC asked him about it.
“It’s not true,” Buffett said. “There are a variety of factors that enter into the rate charge.”
Buffett said the interest rates are influenced by things such as credit score, down payments, earnings and whether the customer owns land. It has “nothing to do with your religion or your color or anything of the sort,” he said.
CNBC’s Becky Quick followed up by pointing out that reporters had documented specific examples of transactions where it appeared Clayton had misled customers. Numerous Clayton Homes customers have reported being guided into Clayton’s costly financing, led to believe it was the only option.
Buffett said Clayton retail lots provide paperwork and a board on the wall showing non-Clayton lending options.
“Does that mean that every single transaction gets handled perfectly? No,” Buffett said. “I mean, we’ve got 330,000 employees at Berkshire, and I will guarantee you somebody is doing something they shouldn’t do today.”
He suggested that the “tone at the top” of the company was one of compliance. But he did not address the internal documents that showed how Clayton pressures managers to get a high percentage of customers to take on Clayton financing — described internally as the company’s “capture rate.”
Buffett said the company gets regular examinations by federal and state regulators. He said in the last two years, those examinations led to about $38,000 in fines and refunds of about $700,000.
“If you look at our record compared to most lenders, I think it’s pretty darn good,” Buffett said.
In the Berkshire Hathaway annual report released over the weekend, Buffett disclosed that Clayton foreclosed on more than 8,000 customers last year but still managed to earn $700 million on $3.58 billion of revenue, making it the company’s most profitable year since Berkshire acquired Clayton more than a decade ago.