Mortgage Company Settles DOJ and CFPB Charges for Discriminatory Lending Practices
Commentary by Ilan T. Graff
A mortgage banking and lending company agreed to settle parallel DOJ and CFPB allegations for engaging in discriminatory lending practices.
In the Complaint, filed along with a proposed Consent Order subject to judicial approval, the DOJ and the CFPB alleged that the company (i) discriminated against prospective applicants living in, or seeking credit to purchase properties in, certain communities of color in Delaware, New Jersey and Pennsylvania, and (ii) engaged in acts or practices that discouraged those living in, or seeking credit to purchase properties in, such communities from seeking or applying for credit from the company. The DOJ and the CFPB further alleged that the company was aware its practices may have violated fair lending laws but continued them anyway.
The agencies asserted that their investigation showed that the company also (i) distributed emails containing racially insensitive content aimed at the residents in its target "majority-minority" neighborhoods (neighborhoods comprised of at least 50% minority residents); (ii) avoided sending loan officers to its target majority-minority neighborhoods and set up offices in majority-white neighborhoods; and (iii) conducted a marketing campaign that solely featured white individuals and targeted that campaign at majority-white neighborhoods, excluding marketing directed towards the majority-minority neighborhoods.
As a result, the DOJ and the CFPB asserted that the company violated the Equal Credit Opportunity Act and the Consumer Financial Protection Act. The Complaint further alleged that the company violated the Fair Housing Act.
If approved, the Consent Order will require the company to (i) invest at least $18,400,000 in a loan subsidy fund for residents of minority neighborhoods of color in the affected counties; (ii) pay a civil penalty of $4,000,000; (iii) allocate $875,000 to be used for advertising to encourage applicants in the redlined neighborhoods to apply for credit and additional funds for community partnerships and consumer financial education; and (iv) abide by the compliance requirements set forth in the order. Separately, a real estate services affiliate of the company agreed to invest $150,000 for improving minority access to credit as a result of a settlement with the states of Delaware, New Jersey and Pennsylvania.
Commentary
In addition to being a milestone civil rights settlement, this is also Main Justice's first public enforcement action in partnership with the CFPB in this administration - the first (and presumably not the last) product of a previously announced collaboration around redlining. As Director Chopra pursues an expansive role for the CFPB, robust cooperation with the DOJ is another avenue by which the agency may exert greater influence.