DOJ Reaches $31 Million Redlining Settlement with National Bank

The DOJ recently filed a complaint and proposed consent order with a large national bank in the U.S. District Court for the Central District of California, reaching a $31 million settlement over redlining allegations in Los Angeles County. 

The DOJ’s complaint alleges that from 2017 through at least 2020, the bank avoided serving the credit needs and providing mortgage lending services to majority-Black and Hispanic neighborhoods in Los Angeles County, and discouraged borrowers in those neighborhoods from obtaining mortgage loans.  The complaint alleges that other banks received more than six times as many applications in majority-Black and Hispanic neighborhoods in Los Angeles County.  The complaint also alleges that the bank only opened one branch in a majority-Black and Hispanic neighborhood despite opening or acquiring 11 branches during the relevant time period, and no employee was assigned to generate mortgage loan applications at that branch.

Under the consent order, the bank agrees to invest at least $29,500,000 in a loan subsidy fund to increase credit for residential mortgage, home improvement, and home refinance loans in majority-Black and Hispanic neighborhoods.  The bank will also spend at least $500,000 on advertising and outreach, targeted toward reaching residents in majority-Black and Hispanic neighborhoods in Los Angeles County.  The bank will spend at least $500,000 for consumer financial education to provide information, training, and counseling services to residents in majority-Black and Hispanic neighborhoods in Los Angeles County.  And the bank will spend at least $750,000 on professional services to residents of majority-Black and Hispanic neighborhoods in Los Angeles County to increase access to residential mortgage credit.

In addition, the bank agrees to, among other items:

• Conduct a detailed assessment of its fair lending program in Los Angeles County and submit a written report of that assessment to the DOJ.
• Provide annual training to relevant employees on the bank’s obligations under federal regulations and the consent order.
• Open one new branch in a majority-Black and Hispanic neighborhood in Los Angeles County, evaluate future opportunities for similar expansion, and ensure that it employs at least four mortgage loan officers who are dedicated to serving majority-Black and Hispanic neighborhoods in Los Angeles County.
• Establish a Fair Lending Oversight Committee that will review fair lending policies and procedures, as well as all submissions required by the consent order.

The bank denies the allegations, but cooperated with the consent order to avoid prolonged litigation.  The consent order is subject to approval by the federal judge.