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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GAO Report Finds Bank Regulators Not Effectively Enforcing Fair Lending Laws

Posted on August 13, 2009 by Fred Rivera

A new analysis by the General Accountability Office (GAO) found that the existing fair lending enforcement efforts by bank regulators are not working. In the GAO's Fair Lending report noted that regulators have a fragmented enforcement mechanism that impairs effective fair lending enforcement.  The study also detailed deficiencies in the mortgage data currently made available through the Home Mortgage Disclosure Act (HMDA).  In particular, the GAO found that a lack of data concerning borrower credit risk and race/gender information for non-residential mortgages (i.e., small business loans) limited "agencies' and regulators' capacity to identify potential lending discrimination."

The GAO reports comes at a time when congress is considering President Obama's plan for a single financial services consumer regulator--the Consumer Financial Products Agency.   The GAO report may fuel the arguments of advocates who claim that the current system doesn't work, and that a consolidated enforcement agency is necessary.  The GAO report also renews the debate about the adequacy of the HMDA requirements, and whether lenders should be required to report more information about their lending practices.

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