bank agrees to pay fine of $ 5 million and $ 3.85 million to community investment for alleged red line violations | Weiner Brodsky Kider PC
A bank recently agreed to pay $ 5 million in a civil fine and $ 3.85 million in a loan subsidy program to resolve redlining allegations jointly brought by the United States and the CFPB. The lawsuit alleges that the bank discriminated against predominantly black and Hispanic neighborhoods in the Memphis, Tennessee-Mississippi-Arkansas Metropolitan Statistical Area (the Memphis MSA) by failing to market, offer, or grant home loans in these neighborhoods.
The OCC examined the bank in 2018 and identified a possible red line, which resulted in a referral and investigations by the CFPB and the DOJ, who then jointly filed a complaint in the U.S. District Court for the district. western Tennessee. The joint complaint alleged that the bank violated the Fair Housing Act, the Equal Credit Opportunity Act and Regulation B, and the Consumer Financial Protection Act of 2010. These laws and regulations prohibit entities under the guise of discriminating against potential candidates on the basis of their race, color or nationality. origin.
The joint complaint alleged that only four of the twenty-five MSA branches in Memphis were in predominantly black and Hispanic neighborhoods, despite the census showing that 50% of the MSA neighborhoods in Memphis were predominantly black and Hispanic. The bank also did not assign a mortgage loan officer to any of its branches located in predominantly black and Hispanic neighborhoods, preventing lending services to walk-in customers. All marketing efforts were carried out by existing loan officers located in predominantly white neighborhoods. The complaint also alleged that the bank failed to ensure that its fair lending policies were adequate to ensure equal access to credit and that it failed to establish an internal committee following the review of the ‘OCC. In addition, the bank has selected three counties from the MSA of Memphis to offer credit services as part of its obligations under the Community Reinvestment Act. Yet the complaint alleged that those counties received 2.5 times more mortgage applications from the Bank’s “peer lenders”.
The parties’ request for an order by joint consent was granted on October 27, 2021. In addition to a civil fine of $ 5 million (compensation of $ 4 million to the OCC), the Bank must take corrective actions, including reporting and training, to improve its loan compliance program. The deal also includes a $ 3.85 million investment in a loan grant program to increase access to credit for predominantly black and Hispanic neighborhoods in its Memphis lending area. Finally, the bank will be required to open a new loan office and fund advertising in a predominantly black and Hispanic neighborhood of Memphis MSA.
The bank has neither admitted nor denied the substantive allegations.