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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US DOJ Investigating Lending Discrimination Against Native Americans

Posted on December 1, 2010 by Fred Rivera

In a November 30, 2010 speech at the 2010 District of New Mexico Tribal Consultation conference, Thomas Perez , the Assistant Attorney General for the Civil Rights Division, confirmed that his Division is pursuing "several investigations" into potential lending discrimination against Native Americans.

[W]e know that minority communities were hit particularly hard in the foreclosure crisis, and we have created a Fair Lending unit to address any past and future credit discrimination.  Access to credit is the foundation of wealth in our nation, and in order to have real equal opportunity, individuals must have equal access to credit.  Particularly in communities where unemployment rates were already high pre-recession, as with many Native communities, it is critical that we remain vigilant in enforcing fair housing and fair lending laws to ensure they do not suffer even further. 

Several years ago, the Civil Rights Division settled a lending case that alleged that a lender that operated in parts of the West and Southwest had refused to make loans to people who lived on Indian reservations.  Age-old tactics like this unfortunately remain all too common, and we remain committed to aggressive enforcement – we currently have several investigations into potential lending discrimination against Native Americans based on the fact that they live in Indian country.  Fair and equal access to credit is fundamental in providing economic opportunities to those in Indian Country and elsewhere, and we will not tolerate lenders that restrict access to consumer credit on equal terms because of a person's national origin and where they live.  

Perez did not provide further details about the on-going lending discrimination investigations. AAG Perez's full speech is available here.

The Justice Department has consistently announced that prosecuting lending discrimination is a top priority for the Civil Rights Division.   While there may be several "on going" investigations, to date few have resulted in litigation or public settlement agreements.  According to the Civil Rights Division's list of significant cases, the Division has brought only one lending discrimination matter in 2010--an April 2010 settlement between AIG subsidiaries and the Financial Fraud Enforcement Task Force, of which the Department is a member.

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DOJ Settles Lending Discrimination Case Against AIG Subsidiaries

Posted on March 5, 2010 by Fred Rivera

The DOJ's Civil Rights Division announced a $6.1 million settlement with two AIG subsidiaries that the government alleged had engaged in a pattern and practice of lending discriminated against African-Americans.  According to the Wall Street Journal, the government identified approximately 2,500 African-American borrowers that will each receive about $2,300 in compensation under the agreement. 

The Justice Department's settlement resolved its complaint filed under the federal Fair Housing Act and Equal Credit Opportunity Act.  The complaint alleges that African-American borrowers were charged higher fees on wholesale loans made by AIG Federal Savings Bank and Wilmington Finance Inc., an affiliated mortgage lending company.

According to the WSJ article, the AIG subsidiaries disagreed with the Justice Department's allegations but were pleased to reach the settlement and "avoid the distractions and burdens of protracted litigation over contentious issues."

The settlement comes a month after the Department of Justice announced the creation of a Fair Lending Task Force, and resulted from a 2007 referral by the Treasury Department's Office of Thrift Supervision to the Justice Department's Civil Rights Division.   In announcing the AIG settlement, Assistant Attorney General Thomas Perez signaled that  more such cases were in the pipeline.  Perez said that for a long time, lenders' supervision over their mortgage brokers was inadequate.

The DOJ's full press release and links to the complaint and settlement agreement are available at the Civil Rights Division's website: DOJ, Civil Rights Division.

The recent settlement sends a clear message that lending discrimination matters are a top priority for the Obama Justice Department, and this is likely the tip of the iceberg.  As DOJ's Civil Rights Division continues to staff its new Lending Discrimination Task Force and communications between the various federal banking regulatory agencies improve, many more complaints and settlements can be expected over the next several months.

 

 

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