DOJ Enters Into Redlining Consent Order With Credit Union

The DOJ entered into the first-ever redlining consent order against a credit union as part of its focus on “modern redlining.”

The credit union’s membership criteria required that members live in one of six counties near Philadelphia, PA, including Philadelphia County.  The DOJ asserted that the credit union violated ECOA and the Fair Housing Act by discouraging loan applications from borrowers in majority-Black and Hispanic neighborhoods and by denying them equal access to mortgage loan services due to race, color, or national origin.  Among other things, the DOJ alleged that the lender received applications from borrowers in majority-Black and Hispanic neighborhoods at a rate about 2.5 times lower than other mortgage lenders in the area, and originated loans to borrowers in these areas at a rate more than 3 times lower than other lenders.  Further, the DOJ asserted that the credit union:

• Operated only one of its 24 branches in a majority-Black and Hispanic census tract, despite such tracts constituting about a quarter of the census tracts in its area of operations;
• Had zero branches in Philadelphia County, despite that county containing three-quarters of the majority-Black and Hispanic tracts in its area of operations;
• Was previously warned by the National Credit Union Administration (NCUA) that it was failing to provide credit services to “underserved areas” in Philadelphia County and had promised the NCUA that it would open three new branches and conduct targeted outreach and marketing in Philadelphia County, but then intentionally decided not to do so;
• Had inadequate fair lending policies and procedures to monitor fair lending compliance, failed to conduct necessary fair lending risk assessments or address known redlining risks, rejected recommendations from a third-party fair lending auditor to create a fair lending committee, and failed to provide necessary fair lending training to credit union officials and mortgage loan originators; and
• Conducted marketing and outreach in majority-White areas while failing to do so in majority-Black and Hispanic areas, and did not conduct any advertising or marketing in Spanish or employ any Spanish-speaking mortgage loan originators.

The credit union denied the allegations in the complaint.

As part of the consent order, the credit union agreed to: create a $6 million loan subsidy fund to support borrowers in majority-Black and Hispanic census tract; open three branches in majority-Black and Hispanic areas in Philadelphia County; spend at least $520,000 on outreach, marketing, and community development activities in majority-Black and Hispanic areas; and, hire additional employees to support fair lending and improve lending in majority-Black and Hispanic areas.  The consent order did not provide for any civil money penalties.