Justice Department Settles Lending Discrimination Suit Against Countrywide

Posted on December 21, 2011 by Fred Rivera

On December 21, 2011 the U.S. Department of Justice announced it had reached a $335 million settlement with Countrywide, now owned by Bank of America, to resolve allegations of lending discrimination.  The settlement resolves claims that Countrywide charged Hispanics and African-American borrowers higher prices for credit compared to similarly situated non-Hispanic and white borrowers.  The Justice Department announced that the settlement is the largest fair lending settlement in the Department's history. 

The settlement, which is subject to court approval, was filed today in the U.S. District Court for the Central District of California in conjunction with the department’s complaint which alleges that Countrywide discriminated by charging more than 200,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers in both its retail and wholesale lending.  The complaint alleges that these borrowers were charged higher fees and interest rates because of their race or national origin, and not because of the borrowers’ creditworthiness or other objective criteria related to borrower risk.  

According to the DOJ press release, the settlement also resolves allegations that Countrywide violated the Equal Credit Opportunity Act by discriminating on the basis of marital status against non-applicant spouses of borrowers by encouraging them to sign away their home ownership rights. 

For the last three years, the Civil Rights Division has warned of its stepped-up enforcement efforts in the fair lending arena.  While case filings were slow to come, the Countrywide settlement, along with recent fair lending activity out of the Division and by members of the interagency Financial Fraud Enforcement Task Force, suggests that government enforcement of fair lending laws may continue to impact the consumer finance industry during 2012.

Read the DOJ's Press Release here; the Complaint here; and the proposed Consent Order here. 

Read MarketWatch's article here and Bloomberg's article here.

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DOJ Settles Redlining Discrimination Allegations

Posted on May 6, 2011 by Fred Rivera

On May 5, 2011, the U.S. Department of Justice announced a $3.6 million settlement with Citizens Republic Bankcorp Inc. (CRBC) to resolve allegations that Republic Bank, acquired by Citizens in 2006,  refused to lend in predominately minority areas of Detroit in violation of the Fair Housing Act and the Equal Credit Opportunity Act.  The Complaint alleges that CRBC engaged in "redlining" by serving the credit needs of the residents of predominantly white neighborhoods in the Detroit metropolitan area to a significantly greater extent than in majority African-American neighborhoods. 

The settlement, which is subject to court approval, includes a $1.625 million neighborhood stabilization fund that, in a partnership with the city of Detroit, will be used to provide existing homeowners with grants fund exterior improvements; $1.5 million in a special financing program to increase the amount of credit the banks extend to majority African-American areas in Wayne County; and a $500,000 fund for outreach to potential customers, promotion of their products and services, and consumer financial education.  The bank also will open a loan production office in a majority African-American area in Detroit and conduct fair lending training for its employees.

Kristine Brenner, director of investor relations for Citizens Bank, said the lawsuit has no merit and the bank reached a settlement to avoid costly legal fees. “The execution of this agreement is not an admission or finding of any violation,” she said.

The lawsuit originated from a 2010 referral by the Board of Governors of the Federal Reserve System to the Justice Department’s Civil Rights Division.  

The Citizens' case, along with an on-going redlining investigation of St. Louis-based Midwest BankCentre, is a clear announcement by DOJ that redlining prosecutions are a priority of this administration.  According to a  recent BloombergBusinessweek.com article ("A Renewed Crackdown on Redlining," May 5, 2011), the DOJ is stepping up its review of potential redlining issues in the aftermath of the subprime lending crisis. In 1994, DOJ reached a landmark settlement with Chevy Chase FSB based on allegations that the bank refused to provide residential mortgage loans in predominately minority areas of the Washington, D.C. metropolitan area. (Read: U.S. v. Chevy Chase Press Release)  Chevy Chase was the first DOJ suit--and last since the recent Citizen's settlement--focusing solely on a bank's refusal to market its services in minority neighborhoods.
 

 

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