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.