National Bank Settles Redlining Charges
A national bank settled CFPB, DOJ and OCC allegations of redlining under the Fair Housing Act, the Equal Credit Opportunity Act and the Consumer Financial Protection Act.
In a Complaint filed in the U.S. District Court for the Western District of Tennessee, the DOJ and CFPB alleged that from 2014 to 2018 the bank engaged in a pattern of redlining that included avoiding providing home loans and other mortgage services and discouraging applications for credit for properties located in majority-Black and Hispanic neighborhoods. The Complaint alleged that the bank:
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avoided locating branches in majority-Black and Hispanic neighborhoods;
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avoided assigning loan officers to majority-Black and Hispanic neighborhoods;
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failed to monitor its fair lending compliance; and
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discouraged applicants and prospective applicants in majority-Black and Hispanic neighborhoods.
The DOJ and the CFPB further alleged that the bank's "peer lenders" generated 2.5 times more home mortgage loan applications from the majority-Black and Hispanic neighborhoods, indicating the discriminatory effect of the bank's practices.
Under the proposed consent order, the bank agreed to pay a $5 million civil money penalty, of which $4 million will go to the OCC for Fair Housing Act violations. In addition, the bank agreed to place $3.85 million into a loan subsidy program for impacted neighborhoods, increase its lending presence in those areas, and implement proper fair lending procedures.
At a joint press conference, Attorney General Merrick Garland launched a new "Combatting Redlining Initiative." Mr. Garland stated: "Today, we are committing ourselves to addressing modern-day redlining by making far more robust use of our fair lending authorities." In addition, CFPB Director Rohit Chopra warned that the CFPB will be watching closely for "digital redlining, disguised through so-called neutral algorithms." Director Chopra stated that, "[w]hile machines crunching numbers might seem capable of taking human bias out of the equation, that's not what is happening."